Letters | How Hong Kong’s MPF system can be updated to meet the needs of an ageing society

Readers suggest ways to improve the MPF system so that it meets the needs of retirees, and encourage Hong Kong to take a leaf out of the UK’s four-day working week playbook

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An elderly Hongkonger rides through Causeway Bay on September 15. Photo: Xiaomei Chen

Published: 2:30pm, 11 Oct 2022

The Mandatory Provident Fund system has been implemented for two decades. Over this period we have seen enhancements introduced on various fronts, including the e-MPF initiative.

While these have been extremely helpful, the Hong Kong Investment Funds Association (HKIFA) believes structural enhancements should be considered to ensure the MPF system remains fit for purpose and best serves the long-term interests of scheme members, particularly those aged over 65.

These enhancements should focus on better alignment between the regulations guiding the phase in which scheme members save for retirement (accumulation) and the phase where members require support for their post-retirement lifestyles (decumulation).

We suggest relaxing investment restrictions to allow MPF funds to invest in a wider range of asset classes, including but not limited to high yield, infrastructure, real assets, private equity and commodities. Given the need to manage MPF funds through economic cycles, such a change would provide the flexibility to identify additional return drivers for MPF investors and offer benefits of diversification. It would also follow other developed market pensions systems and help MPF investors achieve their retirement objectives.

A separate set of guidelines should be introduced for decumulation to better align with the needs of retirees in Hong Kong. Currently the MPF Ordinance has limited guidance in relation to such decumulation funds.

To cater to Hong Kong’s ageing population, these new guidelines could facilitate the establishment of MPF constituent funds only accessible to scheme members over 65 years old. These decumulation funds could have specific guidelines to allow income distribution to meet the needs of those requiring income replacement in retirement.

The introduction of eMPF provides an excellent opportunity for structural enhancement. If there were a set of decumulation funds available on the eMPF platform, a higher proportion of retirees could remain in the MPF system to benefit from funds catered to their needs, lower pricing and simpler fund switching.