What Is MPF Really Worth to Low Earners? Unpicking Five Statistical Tricks

Professor Francis Lui recently argued in the Hong Kong Economic Journal that the pro-universal-retirement-protection coalition’s pension proposal was doomed — “wise men” would reject it. Using a “typical” 25-year-old earning HK$12,114, he calculated MPF paying HK$8,700 a month versus the coalition’s HK$3,000, as clear-cut as a 3–1 football win. This piece takes the five statistical tricks apart — because at stake is what is MPF actually able to deliver for low earners.

What is wrong with the professor’s maths?

Five sleights of hand: vanishing the coalition’s MPF component, assuming employment rates never change, assuming retirees take worker-level risk, using a higher return assumption, and hiding low earners behind averages. First, the coalition scheme never abolished MPF — it merely halves contributions to 2.5% each side; counting that, its monthly protection is HK$7,550, not HK$3,000. Second, assuming a 60% employment rate decades out defies census projections: over-65s jump from 890,000 in 2009 to 2.31 million in 2034, dragging the 20-plus employment rate from 59.8% to 47.5% and diluting MPF payouts from HK$10,100 to HK$8,200 a month.

How do return assumptions change the conclusion?

Dramatically: under the coalition’s lower return assumption, MPF protection plunges 38% while the coalition’s falls only 20%. Lui assumes 4.8% real pre-retirement returns versus the coalition’s 2.0% — nearly double the compounding over 40 years. But 4.8% is just an average; many earn less, and any return below 4.0% puts MPF behind the coalition scheme. The deeper question is who bears return risk: MPF leaves retirees to shoulder it alone, while the coalition scheme shares some with government. Is the 6% gap under high-return assumptions the “premium” for that risk transfer? That is a policy choice.

What about low-income workers?

The average-number lie hides their plight. For a HK$6,000 earner, MPF delivers just HK$2,250–3,300 a month under the two return assumptions, versus HK$3,600–4,150 under the coalition scheme — 61% and 26% higher. Whether government should modestly redistribute contributions to protect low earners is another key policy question.

Is the coalition scheme perfect?

No — its designers admit the pension is only the first pillar. The first pension is set at 30% of median wages, indexed to inflation not wage growth thereafter — under 17% of median wages after 30 years. The designers never claimed it alone solves everything; the other two pillars remain essential. Still, Lui’s detailed engagement counts as progress — proving that those who dismiss universal retirement protection as “empty slogans” are the ones chanting emptily.

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