MPF is only one of three retirement pillars: what voluntary contributions mean

This article is a rewrite of a report from July 2012.

Complaints that MPF savings were too thin after a decade of accumulation were common in 2012. But under the World Bank’s 1994 framework, old-age protection rests on three pillars — and MPF is only the second.

What are the three pillars of retirement protection?

Pillar one is social security, pillar two is the mandatory retirement scheme (MPF), and pillar three is voluntary contributions. In Hong Kong, social security meant the Old Age Allowance (“fruit money”) and CSSA: the former a modest government token for seniors, the latter means-tested support for those with little savings.

MPF, launched in 2000, built the second pillar — a milestone for retirement protection. But by 2012 it was only 11 years old, contributions were still capped at 5 per cent of income, and accumulated assets were inevitably modest. With contribution caps rising and contribution years lengthening, MPF assets would keep growing — no reason to write the system off.

What do voluntary contributions mean?

The third pillar — voluntary contributions — is what secures retirement quality of life. The forms were many: personal savings, insurers’ investment-linked retirement plans, or voluntary contributions within MPF schemes. For members unfamiliar with investing, making special voluntary contributions on the MPF platform was a solid option. Regular preparation made a comfortable retirement achievable.

The original column also carried a correction: as of March 2012, there were 28 MPF guaranteed funds on the market — 11 offering capital guarantees and 17 offering return guarantees — all still accepting new contributions.