Fidelity MPF Survey: Proactive MPF Management Helps Boost Returns
- The higher the score on the Fidelity MPF Readiness Index, the better the investment returns
- Members with high scores not only know and understand MPF basics, but also manage their MPF proactively
- Engaging with MPF providers helps improve members’ understanding
Hong Kong, 9 February 2015: Fidelity Worldwide Investment today unveiled the “Fidelity MPF Readiness Index” – an inaugural index which measures the level of awareness, understanding and engagement of members with their MPF. The survey found that the higher a member scored on the Fidelity MPF Readiness Index, the better their investment returns were, showing that the level of member engagement is closely related to the performance of their MPF.
Mr. KP Luk, Head of Institutional Business Hong Kong at Fidelity Worldwide Investment, said, “MPF is a key part of financial planning for retirement. MPF management is highly important for every employee in Hong Kong. Through the Fidelity MPF Readiness Index, we hope to educate members about the importance of managing their MPF account, and increase their level of engagement with the scheme.”
The Fidelity MPF Readiness Index is based on data collected through an online survey of more than 1,000 MPF members aged between 20 and 65, with a monthly salary of HK$7,100 or more. The inaugural index had a score of 70.4 out of a possible 100.
The Index comprises three criteria, namely the level of awareness, the level of understanding and the level of engagement members have. The average score for the level of awareness was 87.9, reflecting the fact that members are fairly knowledgeable about their own MPF portfolio. But despite this overall score, one out of every ten respondents had no idea who their MPF provider was or how many accounts they had. The level of understanding was lower than the level of awareness, with a mean score of 70.8. In particular, members lacked understanding about the rights and responsibilities of the MPF provider, the employer and the employee. Only one out of every five respondents fully understood the rights and responsibilities of the three different parties.
The level of engagement was significantly lower than for the other two categories, with a mean score of just 52.6. Over the past 12 months, less than 60% of respondents had read their annual benefit statement. Only 15% of people had looked for information on their MPF and 70% of respondents had not interacted with their MPF providers. The survey also found that even though approximately 90% of respondents agreed they should allocate their MPF assets according to different life stages, only around 50% took action to adjust their portfolio when they reached important milestones, such as getting married, the birth of children, or buying a home.
Mr. Luk commented, “MPF was launched 15 years ago in 2000. According to the survey, the majority of members have a considerable level of awareness about MPF, but their levels of understanding and engagement are relatively low. This was especially true for the respondents in the 4th quartile, where the mean scores for the levels of understanding and engagement were only 48.1 and 19.4 respectively. Some members may think they are fully aware of MPF but they do not spend time to understand it further and actively manage their MPF investment. Based on the survey, MPF accrued benefits account for 40% of the liquid assets of the respondents. Fidelity hopes that members understand that as their MPF assets grow with time, its contribution to their retirement fund will also increase, and this fact makes the scheme worth their attention.”
The respondents in the top quartile of the Fidelity MPF Readiness Index had significantly higher scores for all three criteria of awareness, understanding and engagement than the average, scoring 99.2, 86.2 and 85.9 respectively. The findings imply that in addition to understanding the MPF basics, having the right attitude towards MPF management is also essential for members. The survey also found that the MPF performance of those in the top quartile was better. Around 70% achieved positive growth in 2013. By contrast, only approximately 20% of people in the fourth quartile saw positive returns during the same period.
In addition, around 80% of the top quartile respondents agreed that the MPF is part of their assets and play an important role in their retirement planning, however, only around 40% and 20% of the 4th quartile members respectively agreed with these statements. Among the top quartile of respondents, 14% had a MPF special voluntary contributory (SVC) account, significantly higher than the 2% among people in the 4th quartile. This finding shows that members who know about the MPF and have a good attitude towards it have a better understanding of the benefits of SVC.
Mr. Luk pointed out, “The survey clearly shows that MPF performance is positively correlated to members’ knowledge of MPF and attitude towards MPF management. Since the investment horizon of MPF is very long, if the MPF account is well-managed and the returns improve slightly every year, the impact on the overall sum accumulated will be significant due to the compounding effect. By understanding this point, we hope members can pay more attention to their MPF. In addition to returns, proactive MPF management also helps members monitor whether they are on the right track towards their retirement goals.”
In terms of improving the readiness index of MPF members, Mr. Luk concluded: “MPF is one of the three core pillars of retirement protection and plays an important role in retirement planning. Members should strengthen their interaction with their providers and take a proactive attitude to MPF management. In order to increase their knowledge and understanding of their MPF, members can make use of the tools available to them, such as by reading annual member statements, logging on to their MPF providers’ websites or calling their service hotlines to review their account details. The MPF providers’ websites, member newsletters and seminars, as well as the information provided by the Mandatory Provident Fund Schemes Authority (MPFA) and the Investor Education Centre (IEC) can also further assist members in their understanding of the schemes. Members should make use of the tools provided by various MPF providers, such as the retirement goal calculator, to understand more about their own retirement needs and risk appetite, to help them construct a suitable MPF portfolio. Members also need to review their fund regularly to ensure its performance is in line with their goals. One more point to note is that due to the varying returns of different types of assets, the asset allocation of people’s portfolios also changes with time. It is necessary to re-balance a portfolio’s asset allocation on a regular basis. Retirement goals and risk appetite can change at different life stages; therefore, members should review and adjust the asset allocation of their MPF portfolio accordingly.”
Note to editors
About Fidelity MPF Readiness Index
Commissioned by Fidelity Worldwide Investments, the “Fidelity MPF Readiness Index” is compiled by AC Nielsen and conducted between 26 November 2014 and 5 December 2014. The survey has interviewed a total of 1,010 MPF members who are aged between 20 to 65 on full-time or part-time basis with a monthly salary of HK$7,100 or above and have set up an MPF account. In addition, to fully reflect the working population of Hong Kong, a quota is set with respect to the number of respondents for each particular background group.
About Fidelity Worldwide Investment
Fidelity Worldwide Investment is an asset manager serving retail, wholesale and institutional investors in 25 countries globally outside North America. With USD $275 billion assets under management (AuM), we are one of the world's largest providers of active investment strategies and retirement solutions. Our 6,900 employees serve millions of retail clients and intermediaries such as banks, financial advisers, and insurance companies. Our more than 450 institutional clients include pension funds, life insurers, endowment funds, family offices, and sovereign wealth funds. Around 850 companies trust us with investing or administering their employees' pension assets. Investment is our only business: We have no competing financial services activities, and are focused entirely on enabling our clients to achieve their financial goals through outstanding investment solutions and service. Open-ended mutual funds, which provide investors with liquid access to all major asset classes, are the main products of Fidelity Worldwide Investment. For institutional clients we offer segregated mandates, as well as component or multi-asset solutions, and manager selection. Investors in a number of countries can also access funds of other managers through our open-architecture platforms, which currently hold USD $83 billion (AuA) of third party investment products. (Data as at 31 December 2014)
Kate Cheung, Corporate Communications Senior Manager
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