Hong Kong's compulsory retirement savings scheme is one of the notable beneficiaries of the turnaround in equity markets earlier this year. One manager says that by this stage most should have made up the losses of previous years
For many people who for the past three years have had to pay into a Mandatory Provident Fund (MPF) Scheme, it has felt more like a tax than a savings plan.
Unlike contributions to an Occupational Retirement Schemes Ordinance fund, which can be accessed when you change jobs and therefore used or reinvested, the money in an MPF account generally remains inaccessible for decades.
On top of that, when the MPF scheme was launched equity markets were on the slide. Those who chose equity-heavy MPF funds saw the unit price of their funds decline immediately and continue heading south for the next two years.
Finally, there is some good news. After three consecutive years of negative returns, global markets started on a positive course in March this year and all the signs are that this will continue. Most funds with equity exposure have benefited from this, including most of the 300-odd funds that are offered under MPF schemes.
As of the end of October this year, MPF funds posted an average gain of 15.17 per cent year-to-date, according to data from the Hong Kong Investment Funds Association (HKIFA). About 95 per cent of MPF funds posted positive returns during this period.
Not surprisingly given the movements of the region's markets, Asia ex-Japan funds did the best, clocking up an average gain of 39.23 per cent.
