Around 30% of Hong Kong employers surveyed are unhappy with their current Mandatory Provident Fund (MPF) provider, compared to 23% in 2013, says Mercer Hong Kong in a new study.
Fees, investment performance and employee communications are the three key areas where employers are the least satisfied, reported the survey which covered over 50,000 MPF members.
Fees remain the top concern amongst most employers, with 69% of the respondents showing dissatisfaction, despite the average fund expense ratio of the MPF going down to 1.57% in 2016 from 1.72% in 2013. “Despite the fee reduction over the last few years, satisfaction has not gone up,” says Billy Wong, wealth business leader of Hong Kong, China and Korea at Mercer. “This shows that fee reduction alone may be insufficient to bring up members’ confidence and the fact that neither high nor low fees have any correlation with better investment returns.”
The survey also found that 70% of companies plan to review their current MPF provider, up from 41% in 2013, while 75% of employers plan to review the scheme benefits against market levels, compared to 50% of employers in 2013.
MPF remains the primary government-sanctioned retirement savings vehicle for about 90% of companies in Hong Kong, while the remaining 10% are part of the Occupational Retirement Schemes Ordinance scheme.
However, the average combined contribution to MPF by both employees and employers is 12% of the employee’s salary, which is considered to be well below “ideal” levels.
“Based on Mercer’s own research and many other studies, the people in Hong Kong should contribute between 30% and 45% of their salary – three times as much as the average – to retirement savings plans in order to achieve a reasonably comfortable retirement life,” says Mr. Wong, attributing the reason for the gap to insufficient education on retirement planning.
“Employees should be encouraged to make voluntary contributions into their pension schemes, as well as make their own investment and/or saving plans,” adds Mr. Wong. “On the other hand, the MPF Authority, MPF providers and brokers should also take a more active role in educating employees about retirement planning.”
By Asia Asset Management
2nd of February 2017