Time to check the fine print

Typically astute and informed about property and personal investments, Hongkongers have always been lukewarm about the Mandatory Provident Fund (MPF) and its promised benefits. Despite the best efforts of scheme providers to explain the mechanisms and funds available, concerns still linger about who gains most.

The imminent arrival of the Employee Choice Arrangement (ECA), giving individuals greater control over their personal contributions, should dispel certain gripes. Importantly too, even if people opt not to change provider, they should take this as a spur to check in detail the performance of their accounts and become active managers, not just passive observers, of their accumulating MPF wealth.

"Scheme members should review their MPF portfolio at least once a year," says Philip Tso, head of investment for consultancy firm Towers Watson Hong Kong. "Ideally, this should coincide with the distribution of the annual benefit statement. Members should take the opportunity to understand the performance of their investment funds and, if necessary, revise their choices."

It often happens, Tso says, that investors are unsure where their monthly deductions are going. They have forgotten which choices they made on joining and have since let events take their course.

To ensure things are on track, the smart move is to look again at income, existing allocations, the full up-to-date range of fund options, and one's personal risk profile. The latter obviously changes through the years as retirement approaches.

For that reason, Tso suggests it also makes sense to do a risk profile review every three years as one step to picking the most appropriate funds.

Understandably, there is a degree of caution about recommending a preferred portfolio mix, since so many variables can be involved. However, most professional advisers underscore the need for a reasonable balance, less risky investments as one gets older, and the received wisdom that equities perform best over the long term.