12.4pc MPF returns best in the world

Finance | Karen Ng 19 Jul 2021

Hong Kong's pension system was the world's best in terms of returns last year, according to a report by the Organization for Economic Co-operation and Development.

Schemes under the Mandatory Provident Fund notched up a real rate of return of 12.4 percent in 2020, the highest among 48 countries, the OECD report showed.

Mexico came in second with an investment performance of 9.3 percent.

Revealing the news in her blog, MPFA chairman Ayesha Macpherson Lau said the result was very encouraging.

However, the standout returns of 2020 are unlikely to be repeated this year.

First-half returns on mandatory provident funds were 5.1 percent, according to the Gain Miles MPF Composite Index.

MPF consultancy Gain Miles said the funds had performed well despite a fluctuating market, and expected annual returns on the funds to range between 6 and 8 percent, compared to the 11.8 percent recorded last year.

Meanwhile, Lau said that many middle-income workers are worried if their living standards could be maintained by the pension fund, citing a recent survey on workers' retirement plans.

She said workers should not solely rely on MPF funds to secure their lifestyle after retirement.

To properly utilize the pension system, Lau encouraged employees to monitor their funds actively and optimize returns with the compound interest effect under the dollar-cost averaging method.

Employees can increase their voluntary contributions to the MPF funds as well, Lau added.

Tax-deductible voluntary contributions, which were introduced in 2019, increased by 28 percent in the first quarter. In the 2020-21 financial year, TVCs amounted to HK$2.214 billion, which was a rise of 30 percent over the previous year.

Lau also said the MPFA is going full steam ahead with the eMPF platform to improve the overall efficiency of the system.

The MPFA told the Legislative Council that at least HK$30 billion to HK$40 billion can be saved after the tenth year of the eMPF platform's operation.

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