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Introduction
The Mandatory Provident Fund, often abbreviated as MPF, is a compulsory saving scheme for the retirement of residents in Hong Kong. Most employees and their employers are required to contribute monthly to mandatory provident fund schemes provided by approved private organisations, according to their salaries and the period of employment.
Things to consider
Most people make very small contributions into the MPF meaning it is likely to be insufficient for the vast amount of people upon retirement. Unlike pension schemes in places like the UK, US or Australia, if you decide to leave Hong Kong as an exapt, you can also cash out your MPF; this however is a one-time decision only.
– Fees and charges of the scheme– this for many people is the primary item that they focus on in a review. Whilst this is important it is worth remembering that all MPF schemes are low charged relative to other investment schemes and that chasing low cost normally results in two other things diminishing; quality of service and most importantly of all investment efficiency.
– Assessment of Investment capabilities– of far more importance is an assessment of the capability of the provider to produce returns for the members. This assessment considers past performance, performance of the provider in other product/fund offerings, whether the provider uses third party fund advisors and if so on what mandate and an independent assessment of their skills as managers with a forward view.
– Investment choice– The breadth of offerings an MPF provides its members is a key selection consideration. Whilst this is important the key to unlock the potential for returns comes with the skills/knowledge to effectively use the choice.
Summary
The MPF has been in existence since December 2000 and has served its purpose in terms of encouraging a level of private provision funding towards the retirement gap that exists within the working population of Hong Kong. It has also served to raise awareness of the requirement to save for ones future and has helped create an environment of low cost investing. In summary the MPF is a good starting point in planning ones retirement provision, but it is only that, and regrettably we see far too often people who finish their planning at the start with very serious consequences longer time.
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