The self-employed may have an even greater need to plan for retirement than salary workers, according to a financial expert. 'Saving and building up a nest egg is even more important than it might be to someone who has a stable job because if you are running a business, you are more at risk if something goes wrong,' said Elisabeth Scott, managing director of Schroder Investment Management (Hong Kong). If the business went bankrupt, for example, there could be debts to repay. And, unlike salary workers who might qualify for severance or other payments to help cushion the blow of losing a job, the self-employed would be on their own. Many self-employed people might wish to sell their business as a way of funding their retirement. 'But what happens if they can't do that?' said Ms Scott. Self-employed people between the ages of 18 and 65 are required to enrol in the Mandatory Provident Fund (MPF) scheme. Contributions of 5 per cent a month are required if earnings are at least HK$5,000 per month. The maximum income level for required contributions is HK$20,000 per month. 'Most self-employed people are probably going for the bare minimum of 5 per cent on HK$20,000 a month. In that case, they really need to be sure they are saving elsewhere. MPF should be considered as only one part of a long-term savings plan,' she said. Ms Scott added that the self-employed should make a point of putting away more than a salaried worker and also maintain a reserve for unexpected contingencies. A diversified investment plan is advisable with returns that at least beat inflation. 'If the long-term inflation rate is 2.5 per cent to 3 per cent, you know you need more than 3 per cent,' she said. Returns should fall within the risk level of what an investor can tolerate. Some of the highest returns, however, come with the highest risks. 'You have to ask yourself what sort of appetite you have for risk. If you cannot tolerate any negative return, we will advise going down the risk curve and choosing a return of inflation plus 1 or 2 per cent,' she said. A three- to five-year investment horizon is considered desirable. 'Providing you look at the market over the long term, it will always be a good time to invest,' she said. People who were worried about getting into the market when prices were soaring should invest on a regular basis by dollar-cost averaging, which provided some insulation against fluctuation in market prices.
