Leading MPF commentator calls for further savings incentives

19th April 2022

Tax deductions underpin strong MPF inflows

MPF Ratings’ March MPF Asset Class Fund Flows Summary has now been uploaded.

Key points are as follows:

MPF records highest monthly and quarterly net fund inflows since the introduction of Tax Deductible Voluntary Contributions (TVC) in April 2019. March and Q1 2022 saw estimated inflows of $6.27bn and $15.29bn respectively (See table 1).
Record inflows attributed to surging TVC contributions as end of tax year approached. March’s monthly estimated net inflow of $6.27bn was approximately 50% (48.8%) higher than the monthly MPF net inflow average since TVC’s launch while Q1 2022’s quarterly TVC specific contributions are expected to be over 200% higher than the historic average quarterly TVC contribution level (See Chart 1).
Despite HK & China equities producing negative returns in every month of 2022, and for 9 out of the past 12 months, the asset class was the most popular amongst MPF members, attracting 105.6% of March’s monthly net inflows and 2/3rds of MPF’s quarterly total net inflows (Also see table 1).
Despite record net inflows MPF’s total assets fell to $1.121tr at the end of Q1 2022 (Also see Table 1). The lowest MPF asset level since November 2020.
Factoring in MPF contributions and market movements, average account balances per 4.6m members fell -$1,900 in March to $244,400. A decline of -$13,300 for first quarter of 2022.

Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent Mandatory Provident Fund (MPF) research specialist today released MPF Ratings’ March MPF Asset Class Fund Flows Summary by highlighting the positive savings effect tax incentives are having and called for further incentives to encourage saving for retirement.

Quotes:

MPF’s surprisingly strong net inflows

“Despite the acute uncertainty affecting global markets MPF attracted a surprisingly strong $6.27bn in net inflows in March and $15.29bn in the first quarter this year.”

The reason for MPF’s strong net inflows

“Tax incentives were the key driver for MPF’s strong net inflows. Since the introduction of Tax Deductible Voluntary Contributions (TVC), the March quarter has seen an average inflow increase of over 200% into TVC accounts as MPF members rush to take advantage of the tax break afforded by TVC before the end of the tax year.”

Leading independent MPF commentator calls for additional incentives to encourage long term self-funded retirement

“Through TVC MPF members can enjoy a tax deduction up to HK$60,000 while saving for retirement. The growth in TVC contributions shows incentives work and we encourage further incentives to promote self-funded savings for retirement. TVC is proving that with the right incentives, Hong Kong workers are prepared to accept their savings responsibility.”

Table 1: MPF Asset Class Fund Flows as at 31 March 2022