Workers in Hong Kong are encouraged to save 12 times their final salary and have a suggested savings rate of 20%, says pension provider Fidelity International.
The savings will put Hong Kong workers on track to replace nearly half (48%) of their pre-retirement income, when they retire at the age of 65.
Separately, the 2018 Melbourne Mercer Global Pension Index ranks Hong Kong's retirement income system in 22nd position out of 34 systems assessed around the world.
The report notes that currently, Hong Kong’s retirement income system includes the Mandatory Provident Fund (MPF) to which employers, most employees and the self-employed are each required to make regular mandatory contributions calculated at 5% of relevant income, subject to the minimum and maximum relevant income levels. Scheme members who have reached the age of 65, or who have reached the age of 60 and have decided to retire, can choose to either withdraw their MPF benefits in a lump sum or by instalments or retain all their MPF benefits in their accounts for continuous investment.
The report adds that Hong Kong's system can be improved by:
- introducing tax incentives to encourage voluntary member contributions to increase retirement savings,
- introducing a requirement that part of the retirement benefit must be taken as an income stream,
- increasing the level of household savings and reducing the level of household debt,
- increasing the labour force participation rate at older ages as life expectancies rise.