Mandatory Provident Fund (MPF) providers, like human resources managers, are confronted by the generational challenge in the workplace. Accordingly, they are adapting their products and services to the distinct characteristics and preferences of baby boomers and generations X, Y and Z.
All employees will eventually retire – some sooner than others. Boosting employees’ retirement fund through voluntary and additional MPF contributions is one of the best ways to guarantee financial security after the inevitable retirement.
Voluntary contributions to their employees’ retirement fund are likewise “an attractive benefit for retaining employees”, says Alex Chu Wing-yiu, director and head of employee benefits at HSBC Insurance. “It is also a form of provision for future claims of long-service payment or severance payment that could reduce employers’ future liability.”
With the composite factors of a growing affluent market, increasing property prices, and negative fertility rate in Hong Kong, generations tend to have fewer children or even none.
For couples with children, the norm is that many of them would rather be financially independent and not rely on their children to support their post-retirement life. The rapid demographic change means that good retirement planning for ensuring sufficient savings for post-retirement spending and medical needs is becoming more important and inevitable for everyone.
HSBC helps employers educate staff about various options for growing their retirement nest egg.
“We are very focused on the overall development of retirement benefits and have put lots of resources into retirement surveys, product and service development, investor education, DIY retirement planning tools and more in order to serve not just our MPF members but also to educate the general public on their retirement needs,” says Chu.
In choosing an MPF provider, employers and employees are advised against looking only at fees. “In fact, stability, trustworthiness, transparency, commitment to protect your wealth and assets, versatile range of service, and information channels are also important factors to be considered. Members should choose a provider best suited to meet [their] long-term needs,” Chu says.
Members should base their fund decisions on individual investment time horizons and risk appetite, and to view MPF as a long-term exercise rather than short-term investment.
“For members who can afford higher risk – such as young members – they may choose funds with more aggressive investment objectives. For those who should avoid risks, especially members close to retirement, they should consider funds with lower volatility,” Chu adds.
The MPF scheme employs dollar-cost averaging, in which members buy fund units at a fixed amount on a regular basis regardless of the fund price – a strategy particularly advantageous to young people who invest in equity funds. “This group can sustain higher levels of risk and can therefore continue to invest their future MPF contributions in equity markets that have positive long-term outlooks,” Chu explains.
Risk-averse members, including most baby boomers and older employees, should better take advantage of mixed asset and lifestyle funds such as the growth fund, stable fund, balanced fund and stable-growth fund. These are popular MPF choices with diversified risk.
In late 2012, employees will be able to enjoy greater control of their MPF investments upon the implementation of the Employee Choice Arrangement. “[This] is a major milestone for Hong Kong’s retirement-planning industry. We are excited to see the change and are actively revamping our products and services to sustain our market-leader position and growth,” Chu says.
