Hong Kong ranks second in Asian pension systems, behind Singapore, as ageing tests retirement

Hong Kong maintains one of Asia's strongest retirement systems, ranking just behind Singapore, according to a report. The two cities lead their region, surpassing Malaysia, mainland China, Taiwan, Japan, and South Korea. Hong Kong achieved a B grade, with its score improving from 70.6 to 71.2, placing it 16th globally out of 55 systems. The city excelled in governance, receiving an A grade of 89.4 for integrity in the Marsh CFA Institute Global Pension report.

Hong Kong's Mandatory Provident Fund (MPF), the compulsory retirement savings scheme, covers 4.97 million members. Unlike many countries, Hong Kong has no statutory retirement age, and most people retire between 60 and 65 years old. When they reach age 65, they can access MPF benefits.

The report highlights the increasing pressure on retirement income systems worldwide as fertility rates decline and life expectancies rise. Traditional retirement ages of 60 or 65 are becoming outdated in light of longer, healthier lives. As the line between work and retirement blurs, driven by the rise of gig and part-time work, pension systems must adapt to reflect modern realities.

Tim Jenkins, lead author of the report and partner at Marsh Investments and Retirement, emphasized that even the best-performing systems must remain flexible. No system can afford to stand still amidst demographic shifts. Retirement design must evolve, considering variables such as when people access income, how products are structured, and the distinction between work and retirement.

Globally, the Netherlands, Denmark, Iceland, Singapore, and Israel maintained their A grades, boasting index scores above 80. While most Asian pension systems scored higher overall, they either remained in the same regional ranking or slipped as peer economies improved more rapidly. The common challenge lies in converting retirement savings into sustainable income for longer lifespans, expanding coverage, improving minimum support for lower-income retirees, and encouraging older workers to stay in the workforce.