Young workers go 95pc high-risk on MPF: consolidate those preserved accounts now

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

Investment markets were turbulent in 2012 as the eurozone debt crisis dragged down gold, oil and stocks. Tuning out wasn’t an option for workers — 5 per cent of salary (plus the employer’s 5 per cent) flowed into MPF accounts every month, so everyone lived through the volatility.

How did young workers choose MPF funds?

The original columnist ran a small survey (respondents aged 23–33, average annual salary HK$223,000, average 6.7 contribution years):

Young workers chose high risk mainly because retirement felt far away, and they understood dollar-cost averaging plus equities’ better five-year record versus bonds and guaranteed funds. But high risk didn’t guarantee good outcomes: over MPF’s first decade, the gap between the best and worst 10-year Hong Kong equity fund returns reached HK$268,610 (assuming HK$2,000 monthly contributions from early 2001 to end-2011).

Why consolidate preserved accounts?

The second and third findings were really one problem: 67 per cent had changed jobs at least once without consolidating preserved accounts. Too many accounts made management hard. The fix was simple: merge preserved-account benefits into a single account for easier oversight and lower costs. With 19 trustees, 35-plus schemes and 400-plus funds then available, friends or advisers could help with the choice.

And with semi-portability arriving at end-2012 letting employees choose their own trustee for current contributions each year — better to consolidate preserved accounts now than wait. For grassroots and young workers, a decade of MPF compounding was already a huge share of total wealth; mismanaging it risked real regret at withdrawal.