Hongkongers must save 12 times their annual salary to afford pre-retirement lifestyles at 65, says Fidelity

Hongkongers saving for a pension need to save an amount 12 times their annual income to retain their pre-retirement lifestyle at the age of 65, pension provider Fidelity International said on Wednesday.

This means an employee with the city’s median monthly income of HK$16,800 (US$2,145) as of last year will need about HK$2.4 million to maintain their current lifestyle once they retire.

This also shows that Hong Kong’s Mandatory Provident Fund, the compulsory retirement scheme with 2.8 million members, is far from adequate. Its members had only HK$380,000 saved on average at the end of September, 2018, according to data provided by the Mandatory Provident Fund Schemes Authority.

October stock market slump puts Hong Kong’s MPF on track for worst year since 2011

To fill the gap, Fidelity said each employee will need to save an additional 20 per cent of their annual income on top of their MPF contribution. The scheme, launched in 2000, requires that employers and employees each contribute 5 per cent of an individual’s monthly salary up to a maximum contribution of HK$3,000.

“It is important for employees to start saving as early as possible. The public should voluntarily contribute much more to their MPF, or other pension schemes, at a younger age,” said Luk Kim-ping, head of Hong Kong defined contribution business at Fidelity International.

“It is especially true for the younger generation, as the longer they save the more they benefit from the effects of compound interest,” he said.

The Hong Kong government is going to introduce tax incentives for retirement contributions of up to HK$36,000 a year, which Luk said will push people to contribute more to their pension schemes voluntarily. 

Hong Kong’s MPF languishes among the bottom three such schemes globally, not meeting the future needs of pensioners, according to a worldwide study published last month by pension consultancy Mercer.