Pension funds cover just nine percent of Hong Kongers’ retirement savings and a subcommittee from the Hong Kong Investments Funds Association suggesting the general public to add more risky assets instead of holding cash instead.

«The working population believes that post-retirement income will come from multiple sources, and relying on [the Mandatory Provident Fund] alone will not be sufficient,» said Terry Pan, chairman of the pensions subcommittee at HKIFA in an «SCMP» report.

Income earners in Hong Kong make limited contributions to MPF – a mandatory amount of $386 for the highest bracket – which themselves have also generated volatile returns. In 2019, the fund generated an average return of 12.6 percent, the third-best year in a decade, after an 8.3 percent loss in 2018.

As a comparison, the MSCI World index made a 27.7 percent gain in 2019 and an 8.7 percent loss in 2018.

Add More Risky Assets

2.8 million people in Hong Kong are MPF members – or 73 percent of the employed population – as of March-end last year, according to its report, with total assets of HK$893.3 billion (US$115 billion). At just $41,000 per person, this was insufficient to finance post-retirement lives for many in one of the world’s most expensive cities. Pan suggested not only to rely on cash savings but also to add more risk to support retirement.

«For an employee who is approaching retirement, his biggest asset is not only the size of his investments but also the time he has invested those sums,» Pan said. «For someone in his mid-30s or 40s, he still has more than 20 years of investing his retirement savings. People should not only hold onto cash and miss out on investment opportunities.» 

Diversified Streams

Post-retirement, Hong Kongers rely on new streams of income created through their savings led by bank deposits (35 percent) followed by stocks (16 percent), saving schemes (14 percent) and insurance products (13 percent).

«As more and more employees retire, how to help employees deploy their retirement savings effectively when they reach retirement will become increasingly important,» explained Philip Tso, vice-chairman of HKIFA’s pensions subcommittee. «The survey indicates that there are needs which are unique to the post-retirement phase, such as income stream.»

The data was based on a survey of 900 respondents conducted in late 2019. More than half of the respondents hoped to retire by age 61 but expect to do so only by 64.