mandatoryprovidentfundhongkong's Space http://mandatoryprovidentfundhongkong.posterous.com Most recent posts at mandatoryprovidentfundhongkong's Space posterous.com Thu, 02 Aug 2012 19:52:00 -0700 Why Hong Kong Mandatory Provident Fund (“MPF”) Scheme is Important http://mandatoryprovidentfundhongkong.posterous.com/why-hong-kong-mandatory-provident-fund-mpf-sc http://mandatoryprovidentfundhongkong.posterous.com/why-hong-kong-mandatory-provident-fund-mpf-sc

The implementation of the Mandatory Provident Fund Hong Kong created a required savings plan for Hong Kong residents between the ages of 18 and 65. This compulsory saving scheme can be thought of as a retirement fund or a pension fund that provides for income after retirement age.  The enactment of the Mandatory Provident Fund has provided for the safety and financial security of the millions of residents in Hong Kong after retirement age.  

The life expectancy rate in Hong Kong has dramatically increased over the last two decades with an astounding estimate that in 2039 over 28% of the population will be over the age of 65.  Before the
Hong Kong MPF was enacted sadly less than 1/3 of the population had any sort of retirement funds.  Because of this, and the rapidly expanding aging population, Hong Kong had to intervene and create a compulsory savings plan for its residents. 


Through the Hong Kong MPF, individuals are able to easily and precisely manage their investment and retirement accounts as to their personalized needs and goals.  The MPF, in essence, requires all employees and their employers to each place 5% of the monthly salary into a savings account.  These accounts must be managed and registered with the proper authorities to ensure proper legal requirements are met.  For younger employees, they can choose to balance their portfolio with a mix of high-risk/high-reward, moderate-risk/moderate-reward, and low-risk/low reward funds.  For individuals closer to retirement age, they can choose a more moderate investment strategy. 


The goal of the Mandatory Provident Fund Schemes Ordinance was to ensure that all senior citizens have enough financial reserves and assets to provide for their healthcare, food, housing, and other expenses throughout their retirement years.  It is expected today that individuals should plan on having between enough money to survive for between twenty and thirty years after the retirement age of 65.  What was once a culture where adult children took responsibility and care of the senior population; this is no longer a viable option.  Today, many families have both spouses working until retirement age saving for their financial security in their retirement years. 


A compulsory retirement savings account scheme, like the Hong Kong Mandatory Provident Fund, helps senior citizens and those planning for retirement, not to worry over their living expenses and financial futures once they retire.  It also helps to relieve the albatross many governments today face of a rapidly aging population, and how to cover their care.  For the younger individuals participating in the MPF it has the added benefit of bringing to focus the need for personal retirement accounts and helps them manage their net worth.  While the MPF requirement is a minimum of 10% between the employee contribution and employer contribution, both employees and employers alike are allowed to contribute more as they desire. 


Today, just twelve years after the enactment of the Hong Kong Mandatory Provident Fund, over 85% of residents have a retirement account.  This is provides for the financial security of citizens as they retire; where many had no benefits whatsoever to be able to survive after retirement, today, and moving forward, the Hong Kong MPF has provided that security.  

 

About the Author: When you are searching for information about retail investments and funding choices, you will find that there are a few choices that can really help to improve your portfolio performance.  When you have questions about your investments, you might consider turning to Trustnet, Hong Kong’s premier site for information about fund investment.  Visit their website at www.trustnet.hk for more information.

 

 

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