Mercer, a global consulting leader in advancing health, wealth and careers and a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), released the latest findings of the Mercer Mandatory Provident Fund Satisfaction Index (MPF SI). The monthly index, the first of its kind in measuring the satisfaction levels of Hongkongers towards the MPF system, recorded an average rating of 50.8 over from April 2017 to March 2018.
The index ranged from 47.7 to 53.2, with consistent, ongoing satisfaction levels of around 50. During the same time, the market experienced 27% growth in the Hang Seng Index from April 2017 to March 2018, which failed to translate into a raise in MPF satisfaction levels.
“It is very clear that engagement is the key driver in MPF satisfaction levels,” said Billy Wong, Mercer’s Health & MPF Business Leader, Hong Kong. “We have consistently noticed that MPF members who are more knowledgeable are more satisfied, and same for those who review more or contribute above statutory minimum requirement. We believe that educating the public about MPF voluntary contributions and life annuity schemes will go a long way to addressing the retirement gap. Employers should offer Financial Wellness Education to tackle expectation mismatches and MPF reviews should be conducted.” Mr Wong added.
More financial planning education needed to improve satisfaction
The MPF Satisfaction Index survey results show that member expectation is key in understanding MPF satisfaction. 22% of respondents expect MPF to cover half or more than half of their post-retirement expenses. Interestingly, this group tends to be very satisfied with MPF. Furthermore, out of all the dissatisfied respondents, 71% reported positive MPF returns in the previous year.
“Understanding of MPF as a pillar of retirement protection is inconsistent in Hong Kong,” said Mr Wong. “For this reason, the public’s expectation over the function and performance of MPF are diverging. Members in this sense would still be discontent even if they received a positive return.”
“Employees need more information about the role MPF plays in retirement protection, as well as the other financial products available in the market that can offer them a secure future. We believe employers should actively provide this education to their people, to improve satisfaction levels,” Mr Wong concluded.
Account consolidation and frequent portfolio reviews key to greater satisfaction
The average satisfaction index score for respondents with only one MPF account was 54, higher than respondents with multiple MPF accounts (49.3). These figures show that ease of managing MPF is a key driver in MPF satisfaction.
The survey results also suggest that respondent engagement is positively correlated with satisfaction with the MPF– the higher the knowledge level, the higher review frequency or participation in voluntary contributions, the higher the satisfaction.
However, 30.8% of respondents review their MPF portfolio less than once a year and 6.4% have never reviewed their MPF portfolio. More work needs to be done on educating employees about the importance of regular MPF portfolio reviews to ensure alignment with long-term financial goals.
High awareness of Default Investment Strategy
The Default Investment Strategy (DIS) launched in April 2017 is partly aiming at addressing employee difficulties in making fund choices. According to the survey, one year after launch, 76% of respondents are “aware of what DIS is”.
“It is best practice for employees to review their MPF portfolios at least once a year. For those who may not want to, or do not know how to choose their own funds, DIS may be a good alternative option,” said Mr Wong.