Grasping the pension nettle in Hong Kong
One of the great advantages for a financial adviser in the preparation and discussion of long term saving is when a client grasps the pension nettle early on. With sufficient time, an adviser can draw up the kind of strategic plan that will not only deliver on its retirement income promise but also provide the client with enduring peace of mind as to where the wherewithal for future years’ living will come from.
As with all saving plans, it’s imperative to identify any particular obstacle that could thwart future income expectations. And, here in Hong Kong, there are two such issues I think are worth flagging up to our expat community. First, all employers have to enlist employees in the local Mandatory Provident Fund (MPF). While this brings some reassurance that pension provision is being built up over the earning years, it’s all too easy to be lulled into a false sense of security. And that’s because the sums involved in a MPF in reality are just too small to be the only source of a pensionable income. The minimum level of contribution going into these schemes is just HK$2,400 (around £190) even adding together the employer and employee’s commitment.
Second, expats in this neck of the woods are typically nomadic and it is more usual than not that they will live in several countries in the course of their working lives. Now, each country regulates its own pension schemes or systems and it is is quite possible that when an expat leaves Hong Kong to live somewhere else, even for a short period such as a couple of years, because of the complexities of the local pension system that expat will not participate in any scheme. Opting out of long term saving schemes, even for a relatively short space of time, can have a severe impact on the pension pot leaving it well short of the sum desired at retirement age.
Knowing what obstacles are lying in wait on the pension planning road and taking early and decisive action to avoid them is the best possible way to bring about a financially well-cushioned future.
Simon Parfitt is CEO of Hong Kong, Guardian Life Management