MPF voluntary top-ups cheaper than retail funds — a shortcut to a safer retirement, advisers say

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

From November 2011, the MPF minimum contribution wage floor rose from HK$5,000 to HK$6,500; from June 2012, the maximum income level rises from HK$20,000 to HK$25,000. But with only HK$250 more a month from each side, advisers say voluntary top-ups are the real route to a secure retirement.

Why are MPF voluntary contributions cheaper than retail funds?

MPF voluntary schemes charge no handling fees on contributions or withdrawals, while most retail funds levy initial subscription fees. Those unfamiliar with retail funds risk costly wrong picks — topping up MPF is steadier, advisers say.

How flexible are voluntary contribution schemes?

Providers set few limits — minimums run about HK$300, payable monthly or as lump sums — and withdrawals are flexible, some capped at four a year. Monthly contributions are advised, since lump sums risk buying at the top.

Why is MPF less volatile than retail funds?

MPFA and SFC rules require MPF funds to hold at least 30 per cent in Hong Kong-dollar assets and bar hedging, so investment flexibility — and volatility — is lower. Retail funds face no such constraints: more flexible, but more volatile.

How much extra should you contribute each month?

A 25-year-old on HK$10,000 needs an extra 2 per cent (HK$200) monthly for 99 per cent of the goal. Starting at 35 takes 9 per cent (HK$900) on HK$10,000 for 98 per cent, or 10 per cent (HK$2,000) on HK$20,000 for 100 per cent.

The MPF fund fees comparison is stark: Hongkongers prefer trading themselves and short-term plays, the executive said, but everyone needs three pots — retirement, medical and leisure — and mandatory contributions alone won’t fill the retirement one. For details on voluntary top-ups, see the MPF education hub.