MPF at Ten: Few Cheers, and What Must Change Next

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

The MPF system turned ten on 1 December 2010, and the birthday question is a simple one: what is MPF actually for — a retirement system, or just a savings habit nobody loves? A decade after Hong Kong’s first mandatory occupational savings products were issued, the MPF barely got a round of applause. One English-language financial commentary argues the system’s biggest problem is not performance but image — and the government and the MPFA have a great deal to answer for.

What did ten years of MPF achieve?

In fairness, MPF did what it was set up to do: it gave millions of workers professionally managed savings. Without it, many would have had little or nothing put aside for old age — maybe the odd holding in third-line shares. MPF may not be enough to carry anyone through retirement, but it made saving for retirement a mass habit. The system also evolved: from mandatory contributions only to voluntary top-ups and preserved-account consolidation, and from a fund range with no Hong Kong funds at launch to China-related and sector funds members actually want.

Why is MPF’s image so poor?

Because the government walked away from policy responsibility on 1 December 2000 and never looked back. The commentary argues officials thought their job ended with legislation, never grasping that MPF is ongoing and must change over time in both objectives and structure. The low points of the decade: the HK$6,000 injection, the four-year saga to introduce member choice in employee accounts, clumsy fee-reduction directives, and extra burdens on providers that kept costs high without helping members’ balances. Providers have got better at talking to customers, but correcting press errors and telling Hong Kong how good MPF is was never their job — that belongs to the government and the regulator.

What should the next ten years bring?

Room to evolve: less interference, more listening to industry professionals. MPF now matters to more than two million members, and it is no longer only about retirement — it is savings for key moments in life. The commentary urges the government to create the right conditions, which usually means less meddling and listening to practitioners first. Bolder ideas: why confine MPF to Hong Kong investors? Why not RMB accounts, RMB equity and bond funds, or a place in the Asian passport idea? If the MPFA will not let MPF evolve, providers may build a parallel savings system with the same service providers and a fund range the public — not the regulator — wants. Done right, MPF could become a multi-currency international savings system: Hong Kong’s wise, world-respected answer to an ageing population.

To compare charges and returns across MPF funds, visit MPF fund comparison.