Retirement readiness falls to 50.2pc as Fidelity urges tax breaks for voluntary MPF savings

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

Fidelity International’s 2012 retirement survey found Hongkongers’ retirement savings gap had grown from HK$1 million in 2010 to HK$1.4 million, dragging the retirement readiness index from 54.2 per cent to 50.2 per cent. To cope, 75 per cent of respondents said they would work after retirement, 32 per cent would save or invest more, and 28 per cent would delay retirement. Overall, 40 per cent expected to keep working at or beyond 65, and 48 per cent felt their savings could not support 20 years of retired life, with inflation and share prices the main culprits.

What did Fidelity prescribe?

Fidelity proposed three policy moves: raising the minimum monthly MPF contribution with related tax relief, offering tax incentives to special voluntary contributors who committed to fixed contributions, and making personal finance a compulsory subject in secondary schools. It also urged MPF providers to give investors concrete, comprehensive guidance and accessible education.

The survey found 25 per cent of respondents’ retirement portfolios were in “stable growth” and 24 per cent in “capital growth” options; 85 per cent were saving for retirement outside their retirement plans, with a median monthly retirement saving of HK$3,500.

The knowledge gap before semi-portability

With MPF semi-portability due on 1 November 2012, 70 per cent of respondents knew it was coming but 75 per cent did not understand the details. About a third said they would switch providers after launch; 46 per cent worried they lacked the knowledge to compare fund managers, 40 per cent did not know how to prepare, and 41 per cent relied on the internet, family and friends for information.

Drawn from the same Fidelity study covered in a companion report, this story focused on the policy and education angle: with the public still unclear about the Employee Choice Arrangement, tax incentives and financial literacy — not market competition alone — were the deeper fixes.