Fidelity research reveals that Hong Kong's retirement readiness has improved but remains well below predicted retirement needs

Hong Kong, 9 June 2010 – Fidelity International (Fidelity) today announced the key findings of the Fidelity Retirement Readiness Index 2010. The study reveals that, in spite of improvements over the past two years, a significant gap remains between the predicted retirement needs of Hong Kong’s working population and the level of retirement income people will receive. The Hong Kong population’s expectations of required savings and resources in retirement remains unrealistically low, and individuals continue to be in danger of facing a strong decrease in spending power in retirement—a cut of more than 45%.


“Although there have been improvements over the past two years, a significant gap remains between retirement income expectations and the reality of retirement needs,” said Kerry Ching, Managing Director of Fidelity Hong Kong. “The need for financial institutions, regulators and the government to educate the public about retirement readiness remains of utmost importance. Fidelity is committed to helping people better prepare for the financial changes that take place at retirement, providing practical tips, education and expert guidance helping people to cope with this important transition in life.”


Fidelity Retirement Readiness Index (the Index) calculates the amount of income needed for a comfortable retirement and offers a measure of retirement readiness (pre-retirement income replacement) for the working population in Hong Kong. The Index utilises Fidelity survey results, current statistical data, and proprietary modelling developed by the Fidelity Research Institute to deliver its findings and conclusions.


The Fidelity Retirement Readiness Index 2010 delivered encouraging findings:


  • Hong Kong’s retirement readiness has improved compared to 2008, with a Retirement Readiness Index increase from 43% to 54%; people recognize that they need to save or invest more to meet retirement needs.


  • More people are starting to save for retirement earlier in life, with 42% of planners starting to save under the age of 30, as compared to 35% in 2008; the mean age for starting to save today is 31 years old, one year younger than in 2008.


  • Since the financial crisis of 2008-2009, people have become more aware and realistic about the importance of managing their investments and savings for retirement; people have become more aware that a gap exist between how much they save and how much they will really need—with a gap in terms of expectations vs. reality of around HK$1 million.


  • People are more aware of their pension and pension investments, with only 30% of respondents having never transacted for their pension investments, versus 39% in 2008.


However, the Fidelity Retirement Readiness Index 2010 also reveals that a gap remains between expectations and the reality of retirement income:


  • At 54%, the level of pre-retirement income replacement remains well below the 67% level of pre-retirement income required for comfortable retirement living, and significantly lower than the 85% needed to enjoy a more varied and active lifestyle (a Retirement Index of 54% means that households are on track to generate income in retirement that is 54% of their final pre-retirement income).


  • More people want to retire earlier in life and live longer; the number of people who want to retire at the age of 60-64 is now 37%, up from 35% in 2008; and at 49%, an increased number of people hope to live until the age of 80-89, compared to only 38% in 2008.


  • Almost half the people (48%) think they will only accumulate HK$2 million or less for retirement;


  • People think their retirement savings will last for 20 to 24 years after they retire.


  • People who have not made provisions for their retirement only start to save at the age of 46, which for most would allow to save too little for a comfortable living.


  • More people save for short-term self-enjoyment. While more people save for travel and holidays or leisure and hobbies than in 2008, the percentage of saving for retirement needs remains unchanged.


As a result of the gap between expectations and the reality of retirement income needs, people may face a number of difficult situations and uncertainties after they retire:


  • At the moment, personal savings constitute the majority of the total accumulated retirement savings (70%), with only 30% expected to come from pensions.


  • Selling equities and shares of stock is expected to be the biggest source of income during retirement (36%), whereas 56% of people worry that fall in stock price will significantly impact their post-retirement income.


  • Only 66% of people worry about inflation, down from 69% in 2008 and meaning that only two out of three people are concerned about the destructive effects of inflation on wealth.


  • There is low awareness of MPF Portability, with almost half of respondents (46%) still not aware of the scheme; and the awareness gets lower with people who are closer to retirement age.


  • Finally, there are conflicts between what people said and what they may actually do. For example, 39% of the respondents cited a good performance record as the number one priority for choosing an MPF provider, followed by company reputation. However, 85% of respondents said they would switch to new providers if they’re offered incentives to switch.


Based on the findings and conclusions from its study, Fidelity offered recommendations to help people enjoy a retirement life that is financially more comfortable. The main recommendations include:


1. Know your Target Number, which is the amount of money that you will need for a comfortable retirement life. While this number is different for all individuals, Fidelity recommends a replacement ratio of 67% of the last income rate before retirement. If earning HK$ 30,000/month, for example, a man is predicted to need HK$3.81 million for retirement.


2. Save effectively and start investing early. Setting aside the same amount each month, MPF assets accumulate much faster when savings begin early in life.


3. Be conscious of the differences between the percentage mix of personal vs. pension savings. While personal savings may be more flexible, pension savings tend to carry more discipline with aims to beat inflation and achieve consistent return.


4. Manage your spending by delaying purchases of big ticket items and manage your debt levels (including credit card debt) to free up money for retirement savings.


5. Increase your financial literacy and seek sensible, objective investment guidance.


6. Don’t overestimate the amount of time that retirement savings will last. Starting to save at age 45 with a monthly contribution of HK$2,000 and invested at a 5% return will lead to savings that last only 42 months after the retirement age of 60.


7. Women should start saving earlier than men, as their life expectancy is longer.

Alternatively, they should save a larger amount of money than their male counterparts if starting at the same age. If they start saving at 45, for example, they will need to save 59% of their income, versus 48% for men to reach a comfortable retirement lifestyle.


“Knowing your target number, having a specific idea of how much you need to set aside each month for retirement and starting to save effectively at an early stage in life will go a long way towards successful financial planning for retirement,” said Kerry Ching. “Carefully managing spending and debt, as well as using expert advice from professionals who understand the financial implications of retirement is crucial for a comfortable lifestyle when income shifts from working to retirement.”


Fidelity defines some of the most important attributes for smart retirement savings management as the “3Qs”, which refer to Intelligence Quotient, Emotional Quotient and Will Quotient. Through a holistic approach to smart investing, Fidelity offers the following list of easy steps that individuals can start taking today for more successful retirement planning with help from an investment professional:


“Fidelity’s 3Qs to Smart Retirement Savings Management – IQ, EQ and WQ”



(1) A few hundred per month could be future’s big bucks

(2) Remember – MPF and personal investments together

(3) Three keys – background, performance and fees

(4) Sweet talks and offers, think twice before you fall over



(1) Invest with a vision, control your emotions

(2) Market ups and downs, don’t get panic and stay calm

(3) Forget the sunk loss, future prospect values more

(4) Invest for long term, avoid frequent churn



(1) Monthly savings to persist, retirement goals won’t be missed

(2) Long lives the ladies, so save more monies

(3) Start saving at 46, may be a little late

(4) Manage spending to save more, comfy retirement after all




Fidelity International is an affiliate but separate company to Fidelity Investments and provides investment products and services to individuals and institutional investors outside of the Americas. Fidelity international has been in Asia for 40 years with offices in Japan, Korea, Australia, Hong Kong, Taiwan, Singapore, China. Fidelity International manages US$215.9billion Assets Under Management (as at 31st March 2010), has over 6 million customer holdings and manages 937 funds. Fidelity International has one of the largest proprietary research teams in the world, providing insights into around 90% of the world's stock markets (as measured by the Morgan Stanley Capital International World Index, 31 March 2008).


In Hong Kong, FIL Investment Management (Hong Kong) Limited currently offers more than 80 mutual funds to investors directly and through over 100 distributors, including retail banks and insurance companies. Fidelity in Hong Kong is the largest provider of the ORSO (Occupational Retirement Schemes Ordinance) Member Choice Defined Contribution Scheme[1]  and is also one of the top ten MPF (Mandatory Provident Fund) scheme providers in Hong Kong[2] and has been awarded Asia Asset Management’s “Best of the Best Country Awards: Winner award for Hong Kong Best Client Servicing for MPF” in 2004, 2005, 2007 and 2008. In 2010, Fidelity was named “Hong Kong MPF Schemes Provider” by Asian Investors as well as winning “Best Equity Pension Group” and Best Mixed Asset Pension Group” over three years in Lipper Funds Awards.



Rowena Kwok

Fidelity International

Tel: 852 2629 2800



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[1].Source: Towers Watson Manager Watch, as at 31 December 2009.

[2].Source: Towers Watson MPF Performance Book, as at 31 December 2009.