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Asset Management / Wealth Management
Hong Kong employees more satisfied with MPF performance
Members with better understanding of pension fund report higher satisfaction score than those lacking in knowledge of system
The Asset 27 Mar 2024

Hong Kong employees are more satisfied with the performance of the Mandatory Provident Fund (MPF) at the end of 2023 than they were at the beginning of the year, notwithstanding the heightened market volatility, according to a market sentiment index.

The Mercer MPF Satisfaction Index shows a rating of 56.6 in December 2023, compared with a rating of 51.5 in January last year. The monthly index, covering over 2,400 employees in Hong Kong at different life stages, aims to provide insights into their varied needs and sentiments towards MPF and retirement.

It was also observed that MPF members who have better knowledge and understanding of the pension fund, including its risks and returns, and actively seek MPF advice are more satisfied, US human resources consulting firm Mercer says.

Members who possess a strong understanding of MPF report a satisfaction score of 61.5, whereas those lacking in knowledge record a score of 51. Similarly, members who comprehend the risks and returns within the MPF system achieve a satisfaction score of 65.3, while those who struggle to grasp these concepts record a score of 47.5.

Divergent fund performances

In 2023, the MPF market recorded an overall average return of 3.5%. For equity fund performance, there was a significant 40% fluctuation between the best and worst performing regional equity fund. The best-performing equity fund category was United States Equity Fund, with a market median of 24.3%, while Hong Kong Equity Fund performed at a market median of -15.5%.

Freddie Cheng, MPF business leader at Mercer Hong Kong, says: “Even when members are investing in the same equity region, MPF schemes can perform differently due to different investment strategies, fund composition, fees, market conditions and risk appetites. Hence, it is crucial for members to understand what and how to select the scheme and specific fund, in order to uplift their retirement savings and MPF satisfaction level.”

“MPF is a long-term investment and members are advised to review their risk tolerance level and the performance of their MPF scheme at least annually or semi-annually. According to the MPFSI survey, 28% of the respondents review their MPF portfolio less than once a year or have never reviewed their MPF portfolio,” Cheng adds.

Lower management fees

Over half of the respondents (56%) want their MPF provider to reduce their management fees, as it directly impacts the returns on their investments over the long term.

As of December 2023, the average fund expense ratio is at 1.37%, having already decreased by 35% compared to 2.1% in 2007. According to the survey, 49% of members expect that the launch of the eMPF platform in 2025 will help to lower the overall fund management fees.

While the MPFSI survey results suggest a strong correlation between high satisfaction rates and high MPF knowledge levels, 49% of respondents claim their employers do not communicate MPF-related matters with them. Effective communication of MPF-related topics is crucial to ensure that employees make informed decisions and plan for their retirement.

“When employees seek MPF-related advice, the human resources department is often considered one of the least preferred sources of support, based on the survey findings. It is more common for members to seek help from family, friends and colleagues. Therefore, more work needs to be done by employers to uplift members’ MPF knowledge level and provide different channels for employees to get assistance,” Cheng says.

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