A lackluster performance in the Mandatory Provident Fund (MPF) shouldn't deter members from contributing more to the savings plan, according to HSBC Insurance.

HSBC said that unlike equity funds, MPF is a mandatory long-term savings plan for retirement. However, there have been concerns that a tepid performance in MPFs can have a negative impact on the hard-earned savings of Hongkongers.

According to the Mandatory Provident Fund Schemes Authority, MPF investments since April 2007 have booked just a 4.5 percent return, while equity funds typically yield higher single-digit returns.

Without revealing the performance of the MPF fund under HSBC's mandate, its general manager and head of employee benefits, Luzia Hung, believes that MPF members should be more active in managing their portfolios, particularly when retirement nears. Hung said focusing more on preserving all that long-saved capital is key.

On the other hand, Hung said younger MPF members may want to consider more risky MPF plays that could yield higher rewards, albeit higher losses as well.

"When the stock market slumps, you can actually buy more units with the monthly contribution," Hung said. "Then, just wait for the market to go back up."

Although the MPF program is already in its eighth year, many still lack the knowledge about how to manage their savings portfolio to maximize returns. According to a survey conducted by HSBC, a third of the respondents said they have never reviewed their fund allocation, while 90 percent do not make voluntary contributions.

"Unfamiliarity with managing your MPF investments can translate into missed opportunities," said Jason Sadler, the managing director of HSBC Insurance in Hong Kong, who said the lender is planning a HK$20 million MPF education program to raise public awareness.

Hung said people need at least two-thirds of their pre-retirement income to manage expenses after retirement.

"If you want to live the life you want when you retire, you better start planning," Hung said.

(HK Edition 05/07/2008 page2)