Information Centre

In response to the letter titled “Fading Pensions” on 9 March by David Dodwell, I write to provide supplementary information to facilitate your readers to have a better understanding of Hong Kong’s MPF System.

The MPF System is set up to help Hong Kong’s workforce save up for their retirement. As the second pillar of Hong Kong’s multi-pillar retirement protection framework advocated by the World Bank, MPF is designed to complement the other retirement pillars, such as personal savings and publicly funded safety nets, to provide the workforce with basic retirement protection.   

Before the implementation of MPF System, there was only about one-third of Hong Kong's workforce covered by some form of retirement protection. Today close to 100% of the total employed population is covered under the MPF and other retirement protection schemes, which is a high ratio internationally. The MPF System is designed as an employment-based, defined contribution system, which is financially sustainable and does not impose a burden on public finance. Besides, defined contribution retirement protection systems have also gained increasing global recognition. To date, 41 jurisdictions worldwide have adopted similar systems, representing a three-time increase from 11 jurisdictions in 2000.

MPF is a long-term investment spanning over 40 years, therefore it is inevitable to encounter economic cycles and market fluctuations during such a long period of time. MPF investments adopt the dollar-cost averaging strategy which helps average out the costs of fund units and mitigate the impact of short-term market volatility. Scheme members are advised against using a short term investment approach to manage MPF. As at end December 2023, the cumulative net return of MPF equity funds and mixed assets funds were 131% and 130% respectively since the inception of the MPF System in 2000. 

The writer argued that MPF scheme members who reach retirement during market downturn might be impacted. What the writer did not state in his article is that, instead of withdrawing their MPF in a lump sum even if the member reaches 65, he/she is entitled to either choose to withdraw their MPF by instalments or retain their MPF benefits in its entirety in his/her MPF accounts for continued investment. This arrangement allows greater flexibility for members to make suitable withdrawal decisions that best meet their personal needs. 

In 2017, the MPFA introduced the default investment strategy (DIS or commonly known as “funds for lazy people”). DIS is a convenient ready-made solution for scheme members who are either too busy or lacking the investment knowledge to manage their MPF. DIS features fee caps, automatic de-risking and global mixed asset investment for risk diversification. In the past year, the net return of the Age 65 Plus Fund and the Core Accumulation Fund under DIS were 7.3% and 14.3%, respectively.

Besides, the MPFA has been making continuous efforts to provide more diversified and suitable MPF investment options while balancing returns and risks. The study on MPF funds which offer stable returns at low fees is ongoing.  In fact, a certain proportion of the future issuances of Government green bonds and infrastructure bonds would be earmarked for priority investment by MPF funds, thereby providing MPF scheme members additional investment options.

Last but not least, with the launching of eMPF Platform by phase from June this year, MPF scheme members will be able to manage their MPF investment via a mobile app or website, and enjoy further fee reduction by 36% for the first 2 years after launching the eMPF Platform and up to $30 to 40 billion in 10 years.

Cheng Yan-chee
Managing Director
MPFA