Hong Kongers displeased with Mandatory Provident Fund: survey

Expectations just aren't met.

Hong Kong people remain generally dissatisfied with the investment and overall performance of the Mandatory Provident Fund (MPF), with respondents giving an average grade of 4.6 in a survey conducted by the Public Opinion Programme at The University of Hong Kong (“HKU”) commissioned by Convoy Financial Group.

According to a release from Convoy Financial Group, most respondents expressed relatively low confidence in MPF’s ability to provide sufficient protection for retirement as indicated by their average grade of only 3.

Mark Mak, CEO of Convoy Financial Group, said that MPF’s current investment rules have resulted in an unsatisfactory return performance and suggested that the government relax restrictions on investment products to increase the incentive for management in order to increase investment returns, as to restore public confidence in MPF.

The survey was conducted with the aim to investigate Hong Kong peoples’ opinions on MPF and retirement plans. The survey was done between 17 November and 3 December 2014 in which 813 Hong Kong people aged 25 to 50 in the working population and MPF members were interviewed by telephone to better understand the current situation of MPF management of Hong Kong people and their financial preferences for retirement.

Here's more from Convoy Financial Group:

MPF return much lower than public expectation Kenrick Chung, Director of MPF Business Development of Convoy, explained “The result showed that respondents are not satisfied with the investment and overall performance of MPF with only an average grade of 4.6, an indicator within the dissatisfaction range.

Respondents generally expected MPF to give an average annual return of 7.2%. However, the annual returns of MPF have averaged only 4% since 2000 and the Convoy MPF index only recorded an average return of 1.78% last year.

Both indicate the MPF return is far below public expectation. Facing such a backward retirement protection policy, most respondents showed relatively low confidence in the ability of MPF in providing sufficient protection for retirement life, only assigning a grade of 3 on average.

More than 80% of the respondents (83%) said that they will rely on themselve” for living expenses after retirement.” He also mentioned that respondents were obviously not active in portfolio management. Some 43% of respondents have not reviewed their MPF portfolio in the past 12 months with the largest incidence in the age group between 45 and 50. More than 50% of respondents (52%) said they have not reviewed their MPF portfolio in the past 12 months.

In addition, the survey also reviewed the respondents’ expectation on plans for retirement life. Most of them stated that they would live around 20 years after retirement and spend around $11,000 a month mainly on daily life such as clothing, food and transportation (61%) and medical care (46%).

Mark Mak, CEO of the Group, said, “While the MPF scheme was launched more than 14 years, people in Hong Kong have not attached great importance to it and furthermore their confidence in the scheme has dropped due to the lower returns. In fact, although the monthly contribution by employees is not high, they can still able to accumulate a considerable reserve for retirement if they regularly and wisely manage and assess their investment portfolio.”

Need 43 years of saving to accumulate enough for retirement - Mr. Mak said that based on a retirement life of 20 years and a monthly expense of HK$11,000, the retirement reserve needed is estimated to be approximately HK$16.04 million.

Taking as an example an employee who has just started his/her career with a monthly salary of HK$12,000, his or her MPF account would have HK$1.64 million when he/she retires at the age of 65. Excluding that MPF contribution, he or she she needs an additional HK$14.4 million as a retirement reserve.