Buying children a house and paying for their wedding are the top priorities for Hong Kong’s middle class, who estimate they would need at least HK$5 million (US$637,175) to cover their retirement expenses, according to a survey by China Construction Bank (Asia).
The bank surveyed 2,500 Hongkongers in January to understand their savings and wealth management habits, including 511 respondents between the ages of 35 to 55 earning between HK$30,000 and HK$60,000 per month.
Twenty-two per cent of the respondents said they were saving to buy their children property, and 12 per cent were saving for their children’s wedding. Hong Kong, which is the least affordable housing market in the world, has seen many parents pay for their children’s homes.
And the average cost of a wedding in Hong Kong was HK$360,577 last year, according to ESDlife, a company specialising in products and services to do with weddings, health and families.
The CCB survey found that 40 per cent of these middle-class earners said they would need HK$5 million (US$637,175) to cover retirement expenses. Assuming a monthly pay of HK$30,000, an individual would need to save 14 years of their annual income. Some 21 per cent said they would need HK$7 million, while 16 per cent said put their requirements at HK$10 million – 27 years of their total annual income.
The median personal income was HK$17,500 as of mid-2018, according to Hong Kong government data.
The study also found that 54 per cent of those surveyed saved up to 20 per cent of their salary while 21 per cent saved between 21 to 30 per cent. The savings were for their own retirement as well as for their children.
Sylvia Ng, head of consumer banking division at CCB (Asia), said the survey showed that Hongkongers people were worried about expenses after retirement.
“Although the middle class has relatively higher income, they also have bigger financial burden, such as their children’s education and planing for their own retirement,” Ng said.
She added that CCB (Asia) hoped to understand the investment needs of Hong Kong’s middle class through this survey and develop the right savings products for them.
A study by the consultancy firm Mercer in October found that returns the Mandatory Provident Fund (MPF) retirement scheme covering 2.9 million employees in Hong Kong was insufficient to cover retirement costs, as it only yield an average of HK$380,000 in individual savings. The MPF ranked was in the bottom three among 45 markets worldwide in terms of adequacy, only better than India and Mexico.
The MPF requires an employer and individual to each contribute 5 per cent of the monthly salary with a combined cap of HK$3,000 per month.
The CCB survey also found that 60 per cent of middle-income earners fear they will not be able to save enough to make ends meets after retirement and more than 64 per cent plan to use bank deposits for their retirement, which offers almost interest.
With regard to their investment choices, some 40 per cent said they preferred to invest in stocks, 37 per cent in MPF and investment insurance products and 31 per cent in mutual funds.
The stock market rally in the first quarter has certainly helped mutual fund investors. The 426 MPF investment funds posted the best quarterly gains in almost a decade at 7.53 per cent, according to Refinitiv’s Lipper research service data.
Hong Kong’s benchmark Hang Seng Index rose 12 per cent during the first quarter, almost wiping out its entire loss of 14 per cent last year.
The Mandatory Provident Fund Schemes Authority chairman David Wong Yau-kar said the government’s newly launched tax incentives scheme will encourage more to save for retirement.
The government last Monday started offering individuals up to HK$60,000 a year in tax incentives for enrolling in an annuity scheme or making voluntary contributions to the MPF plan.