Ten years ago today, Hong Kong's government launched a pension plan aimed at enhancing the nest eggs of the territory's residents.
As it celebrates its first decade, the Mandatory Provident Fund (MPF) has exceeded the government's initial financial target of HK$300 billion: there is a little over HK$345 billion in the retirement kitty.
For the government, amassing the pool of retirement funds has meant that most of Hong Kong's working population is now covered by some kind of pension plan, lessening the future call on government coffers to support an ageing population. It has also helped to further develop Hong Kong's capital markets by bolstering a funds-management industry that is reaping big bucks from MPF-related fees. And for many of Hong Kong's workers, the MPF has changed the way they think about retirement, underscoring the need to voluntarily save more.
'Even though it is still at a development stage compared to some more mature systems in the Asia-Pacific,' such as those in Singapore and Australia, 'Hong Kong's MPF has already gained some momentum,' said Elaine Hwang, director of benefits at Towers Watson, an international pension consultant.
But there is no shortage of critics. Many consumers complain that the mandatory contributions by both workers and their employers are too small to offset living expenses later in life. About 2.4 million workers, or 70 per cent of Hong Kong's workforce, are covered by the MPF plan. As of September, each individual, on average, had only about HK$138,280 in their account. Workers also complain that they cannot choose the providers, which are picked by the employer, and they say the choice of investment vehicles is too limited, fees too high and tax incentives too few to encourage voluntary contributions.
Even the government concedes that the MPF pool is too small. Just this week, Anna Wu Hung-yuk, chairwoman of the Mandatory Provident Fund Schemes Authority, which regulates the pension plan, called for a review of the adequacy of MPF benefits and lower management fees.