The world today is very different from that say 50 years ago. Nowadays, many places in the world have a rapidly ageing population problem. Saving for your future is not just a wise saying - it is prudent and essential to do so.
Hong Kong has a rapidly ageing population statistics show that by 2036 26.4% of Hong Kong’s population will be over 65.
Prior to the introduction of the MPF System, only about one-third of the nearly three million workforce in Hong Kong enjoyed some form of retirement protection or provision.
The Hong Kong Mandatory Provident Fund was implemented in 1 December 2000, following the enactment of the Mandatory Provident Fund Schemes Ordinance in August 1995 and Provident Fund Schemes Legislation (Amendment) Ordinance 1998 in March 1998.
The MPF System is the “second pillar” of the multi-pillar retirement protection framework recommended by the World Bank. The key features of the MPF System include:
1. Person’s covered by statutory pension or provident fund schemes (e.g. civil servants, judicial officers, and teachers in subsidised or grant schools);
2. Member’s of occupational retirement schemes regulated under the Occupational Retirement Schemes Ordinance (“ORSO”) (Chapter 426, Laws of Hong Kong) that are granted exemption under the MPFSO (i.e. MPF-exempted ORSO schemes);
3. Person’s from overseas who enter Hong Kong for employment or self-employment for not more than 13 months; or who are members of retirement schemes of a place outside Hong Kong;
4. Employee’s of the European Union Office of the European Commission in Hong Kong; domestic employees; and self-employed hawkers.
5. Employee’s who are employed for less than 60 days, excluding casual employees as defined under the MPFSO are also exempt from joining an MPF scheme.
Relevant income: $15,000 per month
Employee: The employee and the employer must each make mandatory contributions of $750 (5% of $15,000)
Self-employed person: Mandatory contributions of $750 (5% of $15,000)
Relevant income: $40,000 per month
Employee: Mandatory contributions by the employee and the employer limited to $1,500 each (5% of $30,000 maximum level of relevant income for contribution purpose). Additional amounts may be paid by the employee or the employer or both as voluntary contributions.
Self-employed person: Mandatory contributions of $1,500 (5% of $30,000 maximum level of income for contribution purpose). Additional voluntary contributions may be made.
MPF Conservative Fund: Is a type of money market fund and generally described as a money market fund. All MPF schemes are required to offer an MPF Conservative Fund. All investments involve risks. This fund type is a low-risk fund, but its return may not beat inflation and may even be negative.
Risk Tolerance level – Relatively low
Equity Fund: There are usually three types of Equity Funds, those investing in a single market (e.g. Hong Kong Equity Fund, regional market (e.g. Asian fund) of global market. They invest mainly stocks listed on the stock exchanges approved by the MPFA.
Risk Tolerance level – Relatively high
Bond Fund: The bonds must meet the minimum credit rating or listing requirements prescribed by the MPFA
Risk Tolerance level – Low to medium
Mixed Assets Fund: Also know as balanced funds. Different Mixed Assets Funds have a proportion of stocks and bonds. In general, a greater proportion of stocks is associated with a higher level of risk. Labelling the fund “balanced” does not necessarily imply a 50-50 split between stocks and bonds in the fund’s assets. Some trustees also offer Target Date Funds, Life-Cycle Funds or asset rebalancing services to help scheme members adjust the proportion of various funds in their portfolios at different life stages.
Risk Tolerance level – Medium to high, depending on relative weight of different assets in the investment portfolio. In general, a greater proportion of stocks is associated with a higher level of risk
Guaranteed Fund: The funds two major types of guarantees, capital guarantees and return guarantees. Both capital and return guarantees can either be conditional or unconditional. For conditional guarantees, the guarantee conditions must be met to benefit from the guarantee. Guaranteed funds can be investment linked (i.e. the fund return is based on the performance of the funds assets), or non-investment linked (i.e. the fund return does not hinge on the performance of the fund assets). The guarantor has the right to retain the investment earnings if they exceed the guaranteed return. The retained investment earnings may be taken as guarantor’s profit.
Risk Tolerance level – Relatively low, but it also depends on whether the guarantee conditions are met when the MPF is withdrawn
QUESTIONS? Contact Mr Robin Brown (Robin Brown -firstname.lastname@example.org Tel 2530 2530
In order to help people preserve their savings and not put them at risk towards the time they are planning to retire in HK , insuers apply a default 'derisking strategy' to reduce customers exposure to risky investments and make their future more secure.
Any individual can of course over ride this advice and continue to make their own decisions by informing the insurer to this effect.
Below is a sample notice from Manulife:
Navigator Insurance Brokers Ltd
Unit E, 8/F Golden Sun Centre
No. 59-67 Bonham Strand West
Sheung Wan, Hong Kong