Retirement savings shortfall fears stalk Hong Kong people lacking access to post-retirement MPF solutionsA new Manulife/Hong Kong Survey finds demand for post-retirement MPF solutions offering dividend payments and regular income stream
HONG KONG, May 13, 2020 /PRNewswire/ — New research by Manulife Hong Kong1 has revealed that around one-third of working people in Hong Kong are likely to invest their retirement savings — including accrued Mandatory Provident Fund (MPF) benefits — in stocks when they retire, exposing them to the risk of high volatility. Manulife’s findings underscore the lack of effective post-retirement solutions that offer retirees a regular, stable income stream.
By the time they retire, respondents expect to have saved HK$3.97 million. Based on their expected retirement age (63 years old) and the average lifespan in Hong Kong (85 years old)2, their average monthly disposable income would be about HK$15,000 for a total of 22 years during their retirement. Over half (52%) of the respondents believed that their savings would not be sufficient to support their retirement. To bridge the retirement shortfall, respondents plan to spend less, seek government subsidies, continue working, or invest.
Reap Your Harvest
“Retirement is the time to reap one’s harvest. The size of this harvest depends a lot on how carefully you plan for your retirement, in both pre- and post-retirement stages,” said Raymond Ng, Vice President and Head of Employee Benefits at Manulife Hong Kong. “Wealth accumulation is inevitably the key in the pre-retirement stage, and one of ways to achieve it is through more active MPF account management. After retirement, putting funds into cash savings is not ideal, because inflation will without a doubt erode them, and investing in stocks exposes retirees to the risk of volatility. Equally important, however, is preserving and growing a nest egg in the post-retirement period as life expectancy is getting longer nowadays.”
Although they may be faced with insufficient savings for the retirement they had hoped for, more than half of the survey respondents indicated that they would not withdraw their MPF accrued benefits in a single lump sum when they retire, or they have yet to make their decision.
The Mandatory Provident Fund Schemes Authority (MPFA) recently issued its “Principles for Developing Retirement Solutions”3 (“the Principles”) to assist with the development of retirement solutions under MPF system to better meet MPF scheme members’ investment needs in both the contribution and withdrawal phases. According to the Principles, a retirement solution should be transparent, simple and easy to understand. The expected outcome should be suitable for the contribution and/or withdrawal phases, while its performance should be reviewed regularly to ensure that it is in line with the desired outcomes, and the fee level should be appropriate.
“At Manulife, we believe that it’s time to offer something more to help members meet their retirement needs. To echo the MPFA’s recent call for retirement solutions, we are planning to introduce a brand new solution to our MPF platform in the near future which allows members to stay invested upon their retirement with drawdown benefits,” Mr. Ng said.
Understanding Public Acceptance of MPF
As the largest MPF scheme sponsor in Hong Kong4, Manulife has undertaken the requisite research to better understand public acceptance of its MPF post-retirement solution, which is designed to provide a regular income stream that aims to beat inflation. The survey found that nearly half of all the respondents (49%) were keen on adding such a solution to their MPF portfolios. The top three features most welcomed by respondents were dividend payments (52%), a stable income after retirement (48%), and low risk (30%).
Among those interested in such a post-retirement solution, the majority (77%) said they would re-allocate their existing MPF portfolios to include it, with most (74%) saying they would allocate more than 20% of their portfolios to it. The remainder of this group (23%) preferred to make additional voluntary contributions to include such a solution in their MPF portfolios.
Currently upon retirement, Hong Kong people have three ways to manage their MPF: withdraw all MPF benefits in a lump sum; withdraw them in installments; or keep their MPF benefits in their accounts for continuous investment.
 Survey conducted from March 31 to April 2, 2020, with 1,021 Hong Kong-based working people, retirees, unemployed and housewives aged 25 or above.
 Hong Kong Census and Statistics Department 2018
 The Principles for Developing Retirement Solutions was issued by the Mandatory Provident Fund Schemes Authority (MPFA) on April 1st, 2020.
 Source: Mercer MPF Market Shares Report as at March 31, 2020 by Mercer (Hong Kong) Limited, in terms of market share of assets under management and estimated net cash flows by scheme sponsors.
About Manulife Hong Kong
Manulife Hong Kong, through Manulife International Holdings Limited, owns Manulife (International) Limited, Manulife Investment Management (Hong Kong) Limited and Manulife Provident Funds Trust Company Limited. As a member of the Manulife group of companies, Manulife Hong Kong offers a diverse range of protection and wealth products and services to individual and corporate customers in Hong Kong and Macau.
Manulife Financial Corporation is a leading international financial services group that helps people make their decisions easier and lives better. With our global headquarters in Toronto, Canada, we operate as Manulife across our offices in Canada, Asia, and Europe, and primarily as John Hancock in the United States. We provide financial advice, insurance, and wealth and asset management solutions for individuals, groups and institutions. At the end of 2019, we had more than 35,000 employees, over 98,000 agents, and thousands of distribution partners, serving almost 30 million customers. As of March 31, 2020, we had C$1.2 trillion (HK$6.6 trillion) in assets under management and administration, and in the previous 12 months we made C$30.4 billion in payments to our customers. Our principal operations are in Asia, Canada and the United States where we have served customers for more than 155 years. We trade as ‘MFC’ on the Toronto, New York, and the Philippine stock exchanges and under ‘945’ in Hong Kong.