Towers Watson: Do you have any suggestion to enhance the MPF system?

五月 3, 2011
Joe Chan

Although the MPF celebrated its 10th anniversary in 2010, it is not viewed as a perfect retirement system for the HK society. There are areas which we believe the system can improve. Let’s hear what the market players suggest:-


Kelvin Lee, Head of Institutional Business, “MPF has been implemented for over 10 years in Hong Kong. The current 5% mandatory contribution amount from both employers and employees are relatively low compared to other countries in Asia Pacific such as Singapore. We believe that it’s the right time that the government considers increasing this amount.”


KP Luk, Head of Institutional Business, “We believe that the ECA will give more flexibility to employee to manage their MPF. It is important for government, regulators and MPF providers to do more investor education before the implementation of ECA. To encourage people to do more voluntary contributions, government should consider if they can provide some tax incentives.”


Desmond Ng, Chief Operating Officer, Asia ex Japan, “Over the past 10 years, the government made a few changes to enhance the MPF system. For example, an adjustment of the minimum level of income for MPF contribution from HK$4,000 to HK$5,000, and a government injection of HK$6,000 into eligible MPF Scheme Members’ accounts, etc. All these changes have been well received by the general public. However, these enhancements only benefited selected groups of members.

To benefit the entire workgroup, I think we should look at the contribution rate again. A study conducted by the Hong Kong Investment Funds Association showed that about 82% of respondents realised that they could not rely on the MPF alone in reaching their retirement goals. This is also inline with Towers Watson 2010 MPF Survey, where around 83% of the employees thought that the relevant income is not enough or retirement.


With a longer life expectancy, improvements in standards of living and the increase in health care expenses, it is essential that members accumulate more wealth in order to enjoy quality retirement life. The current 10% contribution is just not enough. Using Singapore as a reference, contribution rates by employers and employees for Singapore’s Central Provident Fund (CPF) are currently 15.5% and 20% respectively, a lot higher than the rates that the MPF scheme is currently offering in Hong Kong. Through the CPF, Singaporeans have benefited from the fact that they are able to save more for their medical and retirement needs. The success of Singapore’s CPF scheme also presents a good case for encouraging voluntary contributions to pension savings in Hong Kong to bridge that retirement gap.”



Elvin Yu, Head of Business, Hong Kong and China,  “MPF members need to be provided with further choices than already available. As a result of rising job mobility in the last few years, employees have learnt to compare the performance of MPF funds and services provided by different MPF providers. Previous restrictions limiting members to only choose the funds of their existing provider has been questioned and consequently has led to an increase in the demand for more fund choices outside of the employers existing scheme.


The Employee Choice Arrangement (ECA) will be a crucial step in opening up more options and choices for members. Under this arrangement members will be able to transfer assets of their employee portion to an MPF scheme of their choice, at least once a year. Employees will thus assume full responsibility in choosing their MPF service provider for their own contributions. This change immediately provides a greater choice for members and potentially allows them to invest in funds which would previously not have been available to them.


The ECA was initially intended for implementation in 2010, however it was pushed back so that further training could take place for MPF intermediaries. There are twenty thousand registered intermediaries in Hong Kong with some 70 per cent being insurance agents. This extension will allow more time for MPF intermediaries to become better equipped and will greatly enhance the quality of service provided by these intermediaries.”


Bonnie Tse, Senior Vice President and Managing Director, “I think the following areas can be enhanced:

Increase the maximum level of relevant income.

Voluntary contributions: Government or the regulator can consider providing tax benefits for voluntary contributions. Take Australia as an example, tax concessions are provided for additional contributions made by an employee, which greatly encourage the amount of

voluntary contributions.

Investment restriction of MPF funds: Government or the regulator can also consider relaxing the investment restriction on MPF funds, e.g. allowing more exposure in emerging markets, so that members can capture the potential investment opportunities there.”



Alan Tsang, CEO, “加強教育及透明度,令成員更能認識和明白強積金對自己退休的定位重要性。”



Benjamin Li, Chief of Pension and Broker Channel, “Tax concession is one item on top of my wish list. As we have seen in other countries like US, UK and more recently Australia, the effect to boost members』 voluntary contribution is enormous. Public education does help the general public to pay attention to the system. As a responsible provider, AXA would keep on educating the public on retirement planning and MPF management in various communication channels.”



Patrick Li, Chief Executive, “We have four main suggestions for the enhancement of the MPF


1. The levels of relevant income used to calculate MPF contributions should be reviewed. For example, to raise the maximum level from $20,000 to $30,000 or more and let the higher income groups contribute more for better retirement.

2. MPF members are recommended to make additional savings if they aim at a quality retirement life and in the meantime, concerning that the current contribution level is inadequate. The convenience of investing through the voluntary contributions of the MPF scheme is an advantage. To make voluntary contributions more attractive, the Government could give tax incentives to encourage people who make voluntary contributions.

3. Greater fund choices should be provided for MPF members and more fund choices could suit different investment appetite. If there are fewer investment restrictions on fund products, more MPF investment categories would be available for MPF members.

4. The lump sum withdrawal at retirement age should be reviewed. Members should be allowed to withdraw their accrued benefits on a monthly basis like annuity programme, rather than drawing down all their savings as a lump sum.”


China Life

Thomas Tam, General Manager, “After being implemented over 10 years, the MPF market still has room to be improved. The government has to reinforce the public awareness that the MPF may not be sufficient, and members have to take good care of their own MPF accounts. Moreover, regulatory parties and MPF service providers have to streamline their operating and enrollment procedures to reduce the charges. The Employee Choice Arrangement will be implemented in due course, if members find that their existing plan fails to provide them their desired fund, it is a good chance for these members to compare their current MPF scheme with other trustees’ schemes by charges, your risk tolerance level, the performance of funds in long-term and the service level of trustees.”


Hang Seng

Wilson Tang, Chief Executive, “The following suggestions may help to enhance the system:

Provide tax reduction incentives to encourage voluntary contributions by members.

Permit the offering of more fund choices with greater flexibility by MPF providers so as to meet individual member’s needs, especially younger employees who have a relatively long investment time horizon.

Introduce an option for retiring members to collect benefit payments in phases instead of in a lump sum.”



Wilsome Chow, CEO, “It is suggested to introduce an uplift of the ceiling for MPF contributions, so as to match the retirement needs of the public. More education for the public should be provided as it is not uncommon to see that some members pay little attention to their contributions and have no idea of their portfolio allocations.”


Sun Life Financial

Billy Wong, Vice President, “There could be a lot of enhancements to the MPF system, for example, the annuitization of payment, allowing a wider range of investment vehicles.”


This article is not intended to provide investment advice. Action should not be taken on the basis of any opinion, view

or statement contained in this article without seeking specific advice. Towers Watson neither endorse nor are responsible for the accuracy or reliability of any opinion, view or statement made in this article, and under no circumstances will Towers Watson be liable for any loss or damage caused by any reliance thereof.