Mandatory Provident Fund (MPF)

Average MPF pension values almost triple in a decade, with total fund now standing at US$99b

Around 3pc of all pension fund accounts had accumulated assets of over HK$1 million by the end of 2016. Average member has HK$183,000 pension pot

PUBLISHED : Wednesday, 27 September, 2017, 7:46pm
UPDATED : Wednesday, 27 September, 2017, 11:47pm

The average value of each member’s holdings in Hong Kong’s Mandatory Provident Fund (MPF) has almost tripled in the past decade, the fund’s watchdog said on Wednesday.

Total MPF assets stood at HK$774 billion (US$99 billion) as of July, with 4.2 million scheme members each holding an average of HK$183,000 per person, up from HK$68,000 in December 2006, according to the Mandatory Provident Fund Schemes Authority’s (MPFA) annual report. .

“Those total assets compare with Hong Kong’s HK$992 billion (US$128.98 billion) fiscal reserves,” noted David Wong Yau-kar, its chairman.

Around 3 per cent of the 9.2 million MPF accounts, or 30,000 accounts, had accumulated assets of over HK$1 million while almost 70 per cent held less than HK$50,000 each by the end of 2016.

Wong again underlined the MPFA plans to improve transparency of the pension scheme by publishing statistics of the performance of each fund on the watchdog’s website, starting from the first quarter of next year.

It is also in the process of building a centralised electronic platform “e-MPF” that will allow pension scheme members to manage all investments with one log in.

Some 65 per cent of all MPF transactions and proceedings are still paper-based, however, creating high administrative costs, according to a PwC report released last week.

Those total assets compare with Hong Kong’s US$128.98 billion fiscal reserves
David Wong Yau-kar, its chairman

MPF fund managers charge an average 1.56 per cent of management and other fees. After deducting fees, the annualised return of MPF funds was 4.3 per cent between its launch in 2000 and July 2017, up from 2.8 per cent in December 2016.

Asian equity funds were the top performers with annualised returns of 7 per cent, followed by Hong Kong equity funds, which returned 6.1 per cent annually.

Money market funds returned the least, with a mere 0.5 per cent annualised return.

Over 40 per cent of the 1,000 MPF members just surveyed by investment management firm Fidelity International were still unaware, however, of the performance of their pension funds last year.

People also tended to underestimate how much they had contributed to their funds, according to the study released on Tuesday.

MPF scheme members who have continuously put money into the funds since 2000 expected their accumulated assets, net of investment returns, to be a median average of HK$130,000, while in reality the number is HK$275,000, the survey revealed.

The rise in asset values is partly a result of surging voluntary contributions on top of the mandatory amount, said Cheng Yan-chee, the MPFA’s chief corporate affairs officer and executive director.

“But this shows scheme members and employers do have confidence in the MPF scheme,” said Cheng.

Hong Kong faces an ageing workforce, with the government estimating almost one in three people will be aged 65 or above by 2041.

Meanwhile, the city’s residents enjoy the world’s longest life expectancy of over 81 years on average, according to data released by Japan’s health and welfare ministry in 2016.