Last year's turmoil on global financial markets battered the retirement funds of the 2.5 million Hong Kong employees in the Mandatory Provident Fund. Their investments lost an average of 8.41 per cent last year.
It was the second-worst performance since the launch of the scheme in 2000; in 2008 the global financial crisis saw MPF funds plunge an average of 26 per cent.
The 423 MPF investment funds rose an average of 7.19 per cent in 2010 and gained 25.89 per cent in 2009.
The loss last year saw the compulsory retirement scheme's total assets fall to HK$336.9 billion at the end of September, down 2.5 per cent from a year earlier. Total assets have fallen 12.37 per cent since mid-June, according to the Mandatory Provident Fund Schemes Authority.
The MPF requires employers and employees to pay 5 per cent of salaries, up to a maximum of HK$1,000 a month each, into funds run by banks, insurance firms or fund companies. Employers choose the fund provider but the employee chooses which of the provider's funds they want the money invested in. They can only withdraw their capital and returns upon retirement at 65 or if they leave Hong Kong for good.
Principal Financial Group's Asia president, Rex Auyeung Pak-kuen, said the poor MPF returns were a result of stock market declines worldwide in the face of the European sovereign debt crisis, the slow economic recovery in the United States and anticipated slower growth in China.
'Most of the major capital markets including Hong Kong have been hard hit, hence the poor MPF investment return is a reflection of this negative factor,' Auyeung said.