Editorial | Hong Kong needs MPF to build on successful first 25 years
The city’s statutory pension scheme is on pace for record returns, but the rising cost of living means it cannot rest on its laurels
Month by month, Hongkongers have been saving up for retirement for a quarter of a century under a statutory pension scheme. While the accumulated Mandatory Provident Fund (MPF) contributions are not enough in a city known for its high cost of living and longevity, the good news is their piggy banks are growing.
The year-to-date net investment return of the MPF stood at 15 per cent, putting the retirement scheme on track for its best year since 2017, when it reported an annual return of 22.3 per cent.
Before the introduction of the compulsory saving scheme in 2000, only about one-third of the workforce were covered by a retirement scheme. They were mainly civil servants and employees of well-established companies and public bodies. The city has come a long way in filling the void, with almost universal coverage now.
It is good that all fund types have recorded positive annualised investment returns since the launch. Equity funds were the best performers, with an annualised net return of 5 per cent, followed by mixed assets funds, which invest in both stocks and bonds, with an annualised net return of 4.5 per cent. The most conservative investment options lost out to inflation with an annualised return of just 1 to 1.2 per cent.
The MPF authority is to be commended for the gradual and smooth launch of the centralised electronic platform for all members, under which the fees will be further reduced. It also plans to study other reforms that would give members more freedom to choose their providers, raise the minimum and maximum income levels for contributions and enhance the default investment strategy, a diversified investment option designed for those with limited investment knowledge.