Pension savings too small for Hong Kongers
Author: Liana Cafolla | Date: 13 Jan 2016
Employees believe retirement money may only last seven years, suggests survey
Almost nine out of 10 Hong Kong workers say their Mandatory Provident Fund (MPF) retirement savings will be insufficient to cover their needs in their later years, with most believing the money will only last about seven years.
About 40 per cent of respondents to a new survey said they relied solely on MPF for their retirement income, and had no other retirement provision.
Although there is no statutory retirement age in the city-state, the average Hong Kong worker retires around the age of 60, meaning that by 67 a large number of retired employees may have run out of money.
The survey, which was commissioned by Convoy Financial Holdings and conducted by the University of Hong Kong, said Hong Kongers would need to work for a further 15 to 20 years to build up sufficient savings and MPF reserves to meet their retirement needs.
A report by the Hong Kong Department of Health last year showed that the life expectancies of both men and women in Hong Kong have risen steadily during the last 44 years, from 67.8 years for men and 75.3 years for women in 1971 to 81.2 years and 86.9 years respectively in 2014.
“Savings are not enough to support retirement when inflation is factored in, which leads to constantly increasing daily expenses,” Mark Mak, CEO of Convoy Financial told the South China Morning Post. He said employees should carefully manage their MPF investments and also choose appropriate investment products to meet their retirement needs based on their risk appetite.
The survey also found that around one-third of respondents plan to invest in equities as a way to build their revenues after retirement, while others said they would rely on their children or on gambling for an income.
The Hong Kong government recently said that it expected spending on social welfare and medical expenses to double or triple in 30 years, based on its expectations that the ratio of people aged 65 or over would double to 30 in every 100. Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung said the city’s famously low tax rates may eventually have to be increased or new forms of taxes introduced to pay for the increased public spending required.
“The recent public consultation on retirement protection has caused heated debates on whether the government should bear the expenses or use its fiscal reserves,” he wrote on his blog. “No matter what is the final consensus, any retirement protection plan cannot go without money. We must search for the source.”
Chan said offering universal retirement protection would cost the government HK$50 billion a year, which amounts to almost the whole of the government’s current spending on social welfare and medical costs, and would be financially unsustainable.