Hong Kongers approaching retirement are more satisfied with the MPF system than their least matured counterparts, according to findings by Mercer Mandatory Provident Fund Satisfaction Index (MPF SI) in its April 2017 survey. The first survey in April 2017 placed the index at 50.3 on a scale of a possible 100.

This monthly survey was conducted by Nielsen, on behalf of Mercer to examine knowledge, understanding and satisfaction with the MPF system and current MPF-related developments.

“Our population is ageing at an unprecedented rate, meaning that post-retirement financial wellness is of paramount importance today. Since its launch in 2000, the Mandatory Provident Fund (MPF) has set out to provide a vehicle for the working population to save for retirement and has become an important part of the total savings pool for retirement needs in Hong Kong,” said Billy Wong, Wealth Business Leader of Hong Kong, China and Korea at Mercer.

“With recent announcements concerning proposed changes to the scheme, such as the introduction of the Default Investment Strategy, we believe that the survey will provide useful insights on the MPF system and hopefully to improve understanding of satisfaction with the scheme.”

Near-retirement employees more satisfied than their younger counterparts

According to the results of the Mercer MPF SI survey, the April 2017 index is 50.3, with only 11 percent of respondents saying they were “satisfied” with the MPF system, 31 percent finding the system only “fair” and close to 60 percent indicating that they are “dissatisfied”.

Within this group, younger employees seem to be less satisfied than their more mature counterparts, where the average satisfaction index for respondents aged 55 or above was 66.4, compared with 47.3 for those aged 35 – 54 and 45.59 for those aged 20 – 34.

“To younger workers, retirement planning may seem like a distant matter which does not require immediate attention, while some may wish they had the funds to invest in other ventures. The Mercer MPF SI offered us very interesting insights as to the different needs and sentiments towards MPF or retirement among employees in different life stages. These differences will be important for MPF providers and government bodies to keep in mind when devising retirement planning or MPF communications and education, to ensure that the content caters to the specific needs of the audience in different age groups,” said Wong.

 Knowledge positively correlated with satisfaction; more work to be done to increase portfolio review frequency

When asked how knowledgeable they are about the current MPF system, over 6 in 10 (61 percent) respondents considered themselves “knowledgeable” and “very knowledgeable”, with only 7 percent rating themselves as “not knowledgeable” and below.

The survey results also suggest that there is a positive correlation between how knowledgeable a respondent is and his/her satisfaction level with the MPF system.

The average satisfaction index for those who deemed themselves “not knowledgeable” about the MPF system was 42.1, compared to 47.5 for those who considered themselves as having “average” knowledge and 52.8 for those who considered themselves “knowledgeable”.

See: Mercer Opines: Do You Think Abolishing the MPF Practice in Hong Kong Will Help?

More work may need to be done on educating employees on the importance of regular MPF portfolio reviews to ensure alignment with their long-term financial goals. According to the survey results, 60.4  percent of respondents review their MPF portfolio more than once a year, meaning that close to 40 percent review it less than once a year, which is the least often a subscriber should look at his/her portfolio to decide if rebalancing is necessary, according to Mercer.

Default Investment Strategy as a potential alternative

The Default Investment Strategy (DIS) launched in April by the government was partly aimed at addressing employees’ difficulties in making fund choices. The DIS offers an automatic rebalancing of risk and income versus growth as investors approach their retirement date.

The results from the Mercer MPF SI survey suggest that Hong Kong employees may not be aware of the DIS and its potential to serve as an alternative to having to actively manage their portfolios. When asked how aware they are of the DIS, only 38.2 percent of respondents were “aware of what it is”, 40.1 percent were “aware of its existence but not of what it is” and another 21.7 percent were “not aware of its existence”.

“Depending on individual needs and goals, it is good practice for employees to review their MPF portfolios at least once a year. The DIS may be an alternative option for those who may not want to or do not know how to choose their own funds. It is important for all stakeholders, including the government, MPF providers and employers to work together to fill this knowledge gap,” said Wong. 

Education to tackle expectation mismatch and improve satisfaction

The MPF Satisfaction Index survey results also showed a lack of confidence among employees that the MPF will meet their retirement needs. Even though the majority of respondents (43 percent) had average expectations when asked if the MPF would cover their post-retirement expenses, more respondents (36.8 percent) had “low” or “very low” expectations than those who had “high” expectations or above (21.2 percent).

With that said, Hong Kong employees are seemingly divided on their expectations for MPF returns. Close to 4 in 10 (39.6 percent) respondents were dissatisfied with the return of their MPF scheme. Among those who were “dissatisfied”, 62.2 percent are enjoying a positive return, and 15.9 percent achieved a return of over 3 percent on their MPF.

“We gather from the survey results that close to 40 percent of employees are dissatisfied with the return on their MPF scheme, perhaps not fully appreciating that most retirement plans invest conservatively to preserve capital,” said Wong.

“The Mercer 2016 Hong Kong Defined Contribution Scheme Survey showed that on an average, the combined contribution to MPF by both employee and the employer is only 12 percent of an employee’s salary, far below the “ideal” level of between 30 percent and 45 percent of the employees’ salary. The survey clearly shows that more post-retirement financial wellness education, both on the amount of funds needed for retirement and how to evaluate investment options, is crucial for Hong Kong’s workforce,” added Wong.

Mercer helps governments and companies across Asia to meet the retirement needs of citizens and employees by offering research-backed insights and advice. It also helps employers with retirement plan benchmarking, plan design, set up and change and communication strategies.

This survey was conducted between April 20 – 26, interviewing 207 respondents who are among the working population with MPF and whose monthly personal income is not less than HKD 7,100 (minimum threshold eligible for MPF membership). The survey was conducted through methods of online self-completion (Age 20 – 54) and offline street intercept (Age 55 or above).

The Mercer 2016 Hong Kong Defined Contribution Scheme Survey covers a broad spectrum of industries with over 50,000 individual MPF members.

Also read: Growing Dissatisfaction among MPF Providers in Hong Kong