Most Hong Kong employees do not start saving until their 40s

Retirement security is a growing issue in Hong Kong and the wider Asia Pacific region, according to a survey by Willis Towers Watson.

The latest findings of the Global Benefits Attitudes Survey reveals that 58% of Hong Kong employees think retirement security has become a more important issue for them over the last 2–3 years. However, only around one-third of them are confident of having enough resources to live comfortably throughout retirement.

“The survey shows that majority of Hong Kong employees do not prioritise their own finances towards saving for retirement until their 40s,” said Elaine Hwang, Head of Retirement at Willis Towers Watson. “Employees generally do understand that they should save for retirement, but the push factor is not strong at earlier ages. Employees at age 40 and above have stronger desire to save for retirement but starting from age of 40 is already quite late to accumulate adequate amount.”

“Employees also expect their employers’ retirement plans as their primary way to save for retirement, but not all employers are willing to take on proactive responsibilities for employee financial well-being beyond statutory retirement contributions,” added Elaine Hwang, “It’s time to rethink the role of employers in helping employees save or invest wisely for retirement, by providing adequate education, guidance and tools.”

Willing to pay for better retirement benefits

Up to 44% of the surveyed employees in Hong Kong are willing to sacrifice a portion of their paycheck for greater employer-provided retirement benefits, and even more (45%) are willing to make similar trade-off for more generous benefits. The same is not true for health care benefits. Only 30% are willing to pay more each month for a more generous health care plan.

“The HKSAR Government’s recent proposal to increase the relevant income cap and to offer tax incentive to employee voluntary contributions in MPF plans have coincidently addressed this needs to a certain extent, and demonstrates Government’s ongoing commitment of encouraging retirement savings,” said Elaine Hwang.

Strong interest in phased retirement

The survey suggests that a considerable minority (17%) of Hong Kong employees expect to still be working in their 70s. Those who expect to work longer are more likely to be in poor health, highly stressed or disengaged with their job.

In contrast to late retirement, employees are expressing a strong interest in phased retirement. Over half (54%) of the respondents said they will keep working for some time before fully retire. Stronger interest is observed in highly engaged employees and those from age group of 40+.

“Phased retirement seems to be an excellent idea for both employers and employees. While employers may transition duties and knowledge through a smoother and more gradual process, employees can also leverage on this opportunity to continue to contribute to their employers while take a chance to become more adaptive to retirement life.”

“Phased retirement programmes are not uncommon in Hong Kong. Having said that, we observe that employers may not have a holistic programme in place, and as a result, the contract terms and benefits items are not adequately established,” remarked Elaine Hwang.

Employers can start with an easy step

Following the proposed plan of the Government to cancel the Long Service Payment offsetting mechanism from MPF balances, money in the MPF pool will be growing and entirely reserved for member’s retirement.

“It is more important than ever for employees to pay attention to their own MPF investment portfolio, while employers to play a more crucial role in enhancing member engagement and encouraging savings for retirement,” said Eric Lam, Head of MPF Advisory Services at Willis Towers Watson.

“Running regular review of MPF providers on their performance and services is the first step towards a proper governance,” Eric Lam pointed out. “Employers can proactively review whether their employees are being provided with the optimal retirement investment opportunities and services based on their different needs and life stages. It’s a good way to showcase their care about employees and their financial future, and to improve employee engagement and the strength employer branding.”

“We observe that employees are more engaged if employers can offer more than one MPF schemes in order to address needs of different employees, especially the wide difference of investment knowledge of employees. When choices are given, it stimulates employees to think about their investment review.”

Willis Towers Watson

A global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries.