Hong Kong’s Mandatory Provident Fund (MPF) performance last year was “remarkable”, and figures show voluntary contributions are becoming more popular, according to Ayesha Macpherson Lau, head of the HK$1 trillion-plus (US$128.3 billion) MPF industry supervisor.
Her comments came after the Organisation for Economic Cooperation and Development’s annual pension report last month ranked the MPF as the best performing pension fund among 48 jurisdictions in 2020.
“The MPF System recorded a remarkable outcome of 12.4% rate of return in 2020,” Lau, chairman of the Mandatory Provident Fund Schemes Authority, says in a statement on July 18. “The MPF helps scheme members accumulate savings through regulator contributions, and leverage on the compounding effect and the power of dollar cost averaging to build their reserves further.”
She notes that tax-deducible voluntary contributions, or TVC, has been “growing more popular” since its inception two years ago. The TVC allows employees to save around HK$10,200 of average tax a year if they contribute more than the mandatory 5% of their salaries to the MPF.
TVC assets rose 28% year-on-year to HK$2.21 billion in Hong Kong’s 2020/21 financial year ended March 31.
According to Lau, this demonstrates “the growing trend of scheme members making use of TVC to increase their retirement assets for additional protection”.
But she points out that the MPF system only aims to provide basic retirement protection for the working population, and advises members to bolster their retirement savings, such as through dollar cost averaging, to increase returns over time.
The MPF is Hong Kong’s largest public retirement system, with HK$1.17 trillion of assets as of March 2021 and more than 4.5 million members.