MPF or just normal saving?

[mistakes_maker]

Hi folks. I have a few thousands dollars that I can put away each month from my salary. I already have an mpf account with Principal and I would like to ask if I should put those extra money into mpf too or just leave it in my savings account. Just want to a good use of this money for future. Thank you in advance for sharing your wisdom!

[aw451]

How much are we talking, are you paying the 15% tax rate and how long do you intend to stay in HK?

[shri]

What is your MPF invested in and when do you expect to withdraw?

Do you have any emergency funds and do you expect to need cash for a major event before MPF withdrawal. Do you have any other investments aside from may be property?

Reason I ask this, you can invest your savings in say HSBC ValueChoice for example outside of MPF if by chance you happen to be at HSBC. This gives you some flexibility of yih don't want to invest in an ETF.

If your employer has a matching scheme for voluntary contributions and no claw backs and short lock in period MPF is a easy choice because of the employer match.

Keeping money in a savings acct is a money loser over time, given inflationary effects. At a very minimum put it in some fixed deposit if you don't want to be in the stocks or bonds area. Say 10K every few months for 6 months duration and then you can either reinvest and compound or withdraw and go to Macau.

[newhkpr]

You can put up to 60,000 a year in a TVC (which is pretty much a voluntary MPF). You can then use that as a tax deduction (of up 9,000$). Free money and nice to force yourself to save all the way up to retirement age.
Make sure your MPF/TVC is invested into stocks though (preferably international, not HK) or your returns would be nothing.

[saltywetman]

You can put up to 60,000 a year in a TVC (which is pretty much a voluntary MPF). You can then use that as a tax deduction (of up 9,000$). Free money and nice to force yourself to save all the way up to retirement age.
Make sure your MPF/TVC is invested into stocks though (preferably international, not HK) or your returns would be nothing.

I do like the sound of free money but I have never been impressed with the returns of my MPF funds- I get international exposure as much as available.I struggle to understand why MPF funds overall seem to underperform compared to my other investments which are largely similar to the mixed international funds in the MPF. The only thing really dragging can be fees.

Have you compared expected performances with the $9,000 "free money" plus $60,000 locked in MPF vs $60,000 kept outside MPF and invested efficiently?

Genuinely concerned I am missing a trick here.

[newhkpr]

I do like the sound of free money but I have never been impressed with the returns of my MPF funds- I get international exposure as much as available.I struggle to understand why MPF funds overall seem to underperform compared to my other investments which are largely similar to the mixed international funds in the MPF. The only thing really dragging can be fees.

Have you compared expected performances with the $9,000 "free money" plus $60,000 locked in MPF vs $60,000 invested efficiently?

Genuinely concerned I am missing a trick here.

I'm with HSBC and the ValueChoice US fund is up as much as any SP500 one is

Actually I just checked. YTD the HSBC one is up 24.7%. VOO (Vanguard SP4500) is up 27%. So yea

[pin]

It's the fees.

[saltywetman]

Just looking into the HSBC ValueChoice- the Management fees (As a percentage of NAV per annum) are relatively low for an MPF starting at 0.73%. Do the Fund Expense ratios eat into the performance/return too? I am assuming they must as they are quoted.

The fees are better than my current employer Fidelity MPF scheme. Whether or not I go for TVCs, I need to look at more carefully. The money will be locked up and there's lot of "currently waived" fees in the brochure which could start eating into the capital if they decide to un-waive them while my money is locked up for another 20 years. I know I could always switch but the hassle...

https://www.hsbc.com.hk/mpf/funds/ma...anagement-fees


https://www.hsbc.com.hk/mpf/products/tvc-accounts/#eligibility

[bdw]

Paying extra into MPF (into TVC account) can be good IF your yearly net taxable income (income after basic allowance, married person allowance, child allowances, etc) is > $200k. This is because your paying tax on this @ 17%, but whatever you put into the TVC you can claim as a tax deduction up to I think $60k/year.

So lets say you put $60k/year into TVC MPF. That money is invested like normal MPF and hopefully grows. But you get a double benefit of a $10k reduction in your tax payment each year (17% of $60k). So this is why even if MPF isnt the greatest investment in the world, it can still be a good thing.

If you are a local or planning to spend the rest of your life in HK, you can't touch this TVC until you are 65. So this is the downside to putting extra money into your MPF TVC. But if you are expat, you can just rock up to the local government office and hold up your hand and say "I declare I am leaving HK permanently" and then withdraw it and get it all back. But you can only do this once in your lifetime.

So MPF TVC is usually more attractive for expats than it is for locals. I will go as far as saying if you are an expat and not planning to live in HK for the rest of your life, you really should be putting $60k/year into your TVC otherwise you are just paying an extra $10k/year in tax for nothing.

Also if you are leaving HK, open the TVC account and dump $60k in it, rock up to tax office and get $10k wiped off your tax bill, close the TVC account next day and fly out of HK. Its a $10k farewell gift for any expat leaving HK permanently.

[Crankshaft]

We have worked it out before. If you plan to leave within the next 25 years or so then a TVC is worth it. I used a conservative 7% return in working this out.

If you can get better returns or plan to stay > 25 years then you are better off doing your own thing. And if you don't invest that extra 10.2k tax savings (very easy to just spend it/forget about it) every year then you're wasting your time.