HSBC has set up a pilot programme in response to a growing interest among employees in retirement planning A growing number of employees who have become used to having the compulsory minimum Mandatory Provident Fund (MPF) contribution deducted from their salaries are choosing to make voluntary contributions to their retirement pension fund. 'We are seeing a gradual increase in the understanding of what MPF is about, and the need to plan for financial contentment upon reaching retirement,' said Luzia Rosa Hung, HSBC general manager and head of retirement benefits. As contributors saw the money in their MPF accounts grow, they were taking a greater interest in the type of funds their money is invested in, she said. This had resulted in a heightened awareness of the need to plan for retirement. 'When the MPF was launched in 2000, it was a bit like the blind leading the blind,' Ms Hung said. 'Providers were excited about the new retirement service but employers were anxious about the administrative procedures and employees were edgy about having to make compulsory contributions.' Now there is stabilisation, and employees are wondering if their compulsory contribution of 5 per cent is enough. A contributor with a monthly income of $15,000 paying the mandatory amount of $1,500 a month (5 per cent from the employee and 5 per cent from the employer) could expect to have just over $1.5 million accumulated benefits on reaching the age of 65. With a life expectancy of 78 for males, this would mean that, on average, there would be $10,910 available a month, or the equivalent of $6,023 a month in today's value. However, with an additional payment of $500 a month, about $500,000 would be added to the account, giving a monthly allowance of $13,949 for 13 years of retirement, or an increase of 27 per cent. HSBC recently launched a pilot programme - a personal contribution service - to give employees more control over their MPF retirement planning. The service allows employees to make additional voluntary contributions to their MPF accounts without causing further administration work for their employers. 'HSBC MPF Personal Contributions is a straightforward, totally private way of making additional contributions to help to build up MPF funds,' Ms Hung said. 'The service is totally private and independent of the employer. However, all contributions can be invested in the same spread of funds the contributor has chosen for the compulsory MPF payments. 'Members can make regular direct contributions from as little as $300, or simply pay a lump sum of $1,000 for hassle-free investing.' The HSBC service is convenient and helps to cultivate a saving mindset. Under the terms of the scheme, contributors can withdraw a minimum amount of $5,000 up to four times a year from their personal contributions without paying extra handling charges. Contributors are not permitted to make withdrawals from their mandatory MPF accounts except under special circumstances stipulated in the MPF legislation. HSBC director Au King-lun, head of institutional and private clients, said even though MPF funds had failed to make spectacular returns in the first two years, contributors had benefited through dollar cost averaging. Dollar cost averaging means making periodic investments of the same amount of money in the same stock, regardless of whether the price is declining or ascending. This is an important factor to consider, especially in long-term planning. This is not to suggest, however, that such a strategy is foolproof and a guarantee of financial success. 'You still have to make wise stock selections and keep abreast of corporate developments to ensure the selection is still a bona fide long-term holding,' Mr Au said, adding that this was where HSBC's fund management expertise could accomplish what the individual investor would have difficulty achieving.