Mandatory Provident Fund in Hong Kong Presented by group 2
M P F
Source http://www.censtatd.gov.hk/major_projects/2001_population_census/main_tables/ population_by_age_group_1991_1996_and_2001/index_tc.jsp
Old-Age Crisis Three-pillar approach -Public -Personal -Mandatory -Voluntary
Before MPF, only 1/3 workforce had retirement protection Implement of MPF, close to 90% workforce enjoy retirement protection Implemented on 1 Dec 2000
Coverage Between 18-65 are required Includes full-time and part-time (employed 60 days or more under a contract ) Self-employed workers
exemptions • Grant or subsidized school teachers • domestic employees • self-employed hawkers • people which covered by statuary pension or provident fund such as civil servant • People who entered Hong Kong less than 13 months or covered by overseas retirement schemes • employees from the European Union Office of European Commission in Hong Kong
Contribution: the contribution amount is compulsory equal to 5% + 5% of salary. : • Contribution range • >=$5000 , <=20000 • the contribution will be fully paid and including the return of their contribution.
Withdrawal Special circumstances 1. Death 2. Early retirement reaching age 60 3. Permanent Departure from HK 4. Total incapacitation 5. A small balance account in an MPF scheme
The Protection of MPF • Stringent approval and registration criteria • Trust Arrangement • Professional indemnity Insurance • Compensation Fund
Guaranteed Fund HSBC
Guaranteed Fund • Launch date: 01.12.2000 • Fund Size: HK$5,049.39(Since 30.06.2006) • Investment Time Frame: Short to medium term • Fund Type: Guaranteed fund
Guaranteed Fund Objective: • To achieve long-term growth with low volatility while preserving underlying capital.
Guaranteed Fund Typical Asset Allocation: • Equities 0-50% • Bonds 20-100% • Cash 0-80%
Guaranteed Fund • Guaranteed Interest Rate: • 1 July 2005 to 30 June 2006 0.25% p.a • 1 July 2006 to 30 June 2007 0.25% p.a.
Balanced Fund HSBC
Balanced Fund Objective: • To achieve medium-high capital growth with medium volatility through a pooled investment fund that indirectly invests in global bonds and equities with a heavier weighting in equities.
Balanced Fund • Launch date: 01.12.2000 • Fund Size: HK$8,259.57(Since 31.07.2006) • Investment Time Frame: Medium term • Fund Type: Mixed Assets fund[Global]
Balanced Fund Typical Asset Allocation: • Equities 55-85% • Bonds and cash 15-45%
Growth Fund HSBC
Growth Fund • Launch date: 01.12.2000 • Fund Size: HK$8,669.17(Since 30.06.2006) • Investment Time Frame: Medium term • Fund Type: Mixed Assets Fund [Global]
Growth Fund Objective: • To achieve investment returns which maximize long-term capital growth potential with medium-high volatility. The fund invests in a pooled investment fund that indirectly invests in global equities, with an emphasis on Asian markets.
Growth Fund Typical Asset Allocation: • Equities 70-100% • Bonds and cash 0-30%
Guaranteed Portfolio • Launch date: 01.12.2000 • Fund Size: HK$1,279.36(Since 31.07.2006) • Investment Time Frame: Short to medium term • Fund Type: Guaranteed fund
Guaranteed Portfolio Objective: • To minimize capital risk in Hong Kong dollar terms. • To achieve a stable, consistent and predictable rate of return.
Balanced Fund AIA
Balanced Fund • Launch date: 01.12.2000 • Fund Size: HK$1,207.63(Since 31.07.2006) • Investment Time Frame: Medium term • Fund Type: Mixed Assets Fund
Balanced Fund Objective: • To maximize long-term capital appreciation in Hong Kong dollars terms within moderate risk parameters. • To outperform Hong Kong price inflation over the long term.
Growth Fund AIA
Growth Fund • Launch date: 01.12.2000 • Fund Size: HK$2,981.74(Since 31.07.2006) • Investment Time Frame: Medium to long term • Fund Type: Mixed Assets Fund
Growth Fund Objective: • To maximize long-term capital appreciation in Hong Kong dollar terms. • To outperform Hong Kong salary inflation over the long term.
VS Guaranteed, balanced and growth funds
Guaranteed Fund AIA HSBC • the portfolio of the funds can be different even their name are the same, so called guaranteed fund.
Period return % AIA HSBC 00-01 3.77 -2.4 01-02 2.08 -0.41 02-03 1.5 0.21 03-04 1.5 0.21 04-05 1.92 -0.41 Annualized rate % 2006 AIA HSBC 1 year 2.00 2.26 5 year 1.83 0.37 Since launch 2.22 -0.10 Last year 2005 2.00 -1.73 Guaranteed Fund • Due to the difference in allocation, their rate of return will also be affected • not only come from the rising interest rate, but also from the stock market fluctuation Source from HSBC and AIA fund fact sheet Sep, 3quarter 2006
Balanced fund AIA • This diversifies some risks from the volatility of stock market when it in a climate of contrasting economic currents, cooling growth and highly inflation. • we have to aware that equity investment is much risky than the bonds. The investors of HSBC have to bear the extra 35% risky than AIA ’s investors. HSBC
Growth fund • Because of their similarity, we are able to compare which fund manager are performed better. • the past performance of them can be very different although they have a similar allocation percentage.
Period return over 2000-2006 HSBC tends to be fluctuating over time to time, especially in the early year 2001-2003. This implied that HSBC ‘s fund portfolio poorly took advantage of diversification
Which funds should I choose? • whichever funds we are chosen is depended on your the degree of risk you can bear. • The simple way to test how much you can bear is 100 minus your current age • it is employers to determine which MPF service provider should be chosen, not the employee. Source from HSBC and AIA fund fact sheet Sep, 3quarter 2006