Why a HK$1 trillion MPF pot gives Hongkongers little reason to rejoice
- Launched 20 years ago, the city’s pension system was inadequate to begin with, and the lack of government action to fix its shortfalls means it still is
- Surveys continue to indicate most Hongkongers won’t have enough to retire on. It’s time for officials to tackle some of the low-hanging fruits of MPF reform
Back in 1998, as the world’s leading fund managers swarmed around the Hong Kong administration pressuring them to set up the Mandatory Provident Fund, licking their lips at the prospect of billions of dollars of new funds on which to earn fees, I remember causing a mini-storm at one major meeting by protesting: “In Hong Kong we may not have a mandatory pension scheme, but we do something else: it’s called saving.”
My protest was of course ignored. Our MPF was launched two years later.
But the concern I had then remains as strong as ever: in Hong Kong’s “caveat emptor” environment, Hong Kong people have always been strong savers, and have held to a fundamental conviction that no one is going to be as vigilant as yourself on the performance of your savings. Professional fund managers – playing with other people’s money – will always be more focused on their fee incomes than the long-term financial security of their MPF savers.
There is a painful backstory to my prejudice. In the UK, in the middle of Margaret Thatcher’s 1980s “cleansing” of the UK economy that lifted unemployment to stratospheric levels, the factory where my father worked crashed into bankruptcy. My father’s company pension evaporated.
Even worse, my father, then in his early 50s, never found full employment again. He struggled on for the next decade in part-time jobs until his meagre state pension kicked in at 65. As a passionate lifetime socialist, he had always naively believed that Britain’s post-war welfare state would guarantee him security in retirement and old age. How cruelly he – and millions like him – were disabused.
