Mandatory Provident Fund (MPF)

First-time buyers in Hong Kong may be allowed to use MPF savings to buy a house … but don’t hold your breath

Value of MPF assets is on track to hit the HK$1 trillion mark by 2020, say senior executives at the pensions regulator

PUBLISHED : Wednesday, 17 January, 2018, 5:52pm
UPDATED : Wednesday, 17 January, 2018, 11:33pm

First-time buyers in Hong Kong could eventually be allowed to withdraw their Mandatory Provident Fund savings to buy property, under proposals being considered by the pensions regulator.

Senior executives at the Mandatory Provident Fund Schemes Authority (MPFA) said on Wednesday that the idea is being studied, although it is unlikely to happen “any time soon” because it would only fuel the city’s sizzling property market, already seen by many as a bubble on the verge of bursting.

Their comments came at the MPFA’s annual media briefing at which it was also revealed that the scheme’s total assets value is on course to hit the HK$1 trillion (US$127.84 billion) milestone by 2020.

A strong stock market rally boosted the assets of Hong Kong’s compulsory retirement scheme to over HK$843.5 billion last year, which was faster than expected.

Allowing first-time buyers to access their MPF contributions early to fund a home purchase would undoubtedly help more Hongkongers to get a foot on the property ladder of the world’s most expensive housing market. Property prices in the city have rocketed to levels well beyond the reach of most people looking for their first home.

Here’s why you should be hands-on with your MPF

It is an issue the Hong Kong government has promised to address.

“We consider that buying a property could be a part of retirement protection, but I need to emphasise the MPFA have not yet reached conclusion on the study,” said MPFA managing director Diana Chan.

Chairman David Wong said the current market conditions mean the timing is not right.

“The property market is very high and very risky. We would not like to see people enter into the market at the peak – that may add fuel to the property market. As such, it would not be appropriate to launch such a policy any time soon,” Wong said.

Since 2011, the MPFA has been studying ways in which the 2.8 million employees and self-employed people covered could be allowed to make better use of the money accumulated under the 18-year-old scheme.

The study, scheduled for completion in the summer, has looked at overseas markets in which national pension-scheme members can use their contributions to buy property, according to Wong.

MPF returned 20.6 per cent in 2017, best performance since 2009

MPF assets enjoyed strong growth last year thanks to the strong performance of the equities market that saw stock funds gain an average of 40 per cent. The average gain of all 481 MPF funds was 21 per cent, according to Thomson Reuters Lipper data.

That easily beat inflation last year at 1.3 per cent, but for members investing in money-market funds or conversative funds, the average return was below 1 per cent.

The MPFA last year launched low-fee default investment funds which cap the total management fees at 0.95 per cent, below the market average of 1.56 per cent. There are already 1.33 million accounts investing in these funds, representing 14 per cent of all 4 million MPF accounts. The total assets are worth HK$21.3 billion.

Redeploy MPF savings for home purchases

Wong said the default investment funds encourage other providers to cut down their fees. The current fee level is 27 per cent lower than it was 10 years ago.

He said the MPFA will launch a “fund performance platform” next month to enhance transparency of the MPF.

It will also propose later this year the introduction of e-MPF, an electronic platform to replace paper in a bid to cut down costs, he said.