Singapore CPF Vs. Hong Kong MPF: 4 Key Differences Between Their Pension Schemes

Singapore and Hong Kong are often compared as global financial hubs. While both share similarities—such as being small, service-driven economies—there are also notable differences.

One significant difference lies in their retirement systems for local residents. Singapore operates the Central Provident Fund (CPF), a mandatory savings and social security system. In contrast, Hong Kong’s primary retirement scheme is the Mandatory Provident Fund (MPF).

For those comparing the two systems, here are four key differences between Singapore’s CPF and Hong Kong’s MPF.

#1 Rates Of Contribution

In Singapore’s CPF system, employed workers aged 55 and below contribute 20% of their monthly wage to CPF, while employers contribute an additional 17%. This results in a total contribution of 37% of the employee’s monthly wage.

For 2024, this is capped at a monthly salary of S$6,800 (approximately HK$39,480). If you earn that amount or more, the maximum monthly CPF contribution is:
S$6,800 x 37% = S$2,516.

In contrast, under Hong Kong’s MPF system, both employers and employees contribute a mandatory 5% of the employee’s monthly wage, provided the salary falls between HK$7,100 and HK$30,000.

For salaries of HK$30,000 or more, mandatory contributions are capped at HK$1,500 each from both the employer and employee. This means the total maximum monthly contribution to the MPF is:
HK$1,500 (employer) + HK$1,500 (employee) = HK$3,000 (approximately S$520).

This is roughly one-fifth of the potential maximum mandatory contribution under Singapore’s CPF system.

#2 Use Of Funds

Singapore’s CPF system offers significantly greater flexibility for its users, as participants can use CPF funds for a variety of life expenses, including housing, healthcare, and retirement income. This flexibility is evident in the CPF’s structure, which consists of four accounts: the Ordinary Account (OA), Special Account (SA), MediSave Account (MA), and Retirement Account (RA).

In contrast, Hong Kong’s MPF is a purely retirement-focused savings scheme. Participants are encouraged to invest their contributions long-term in various funds offered by designated fund managers. This results in limited flexibility regarding how MPF funds can be utilized.

Additionally, CPF participants in Singapore have a wider range of investment options, including low-cost and safe assets such as Singapore Government Securities, T-Bills, and Singapore Savings Bonds (SSBs). In Hong Kong, MPF members face more restricted choices, as they are limited to stock and bond products managed by fund managers—many of which come with high fees.

#3 Guaranteed Returns vs Market-Based Investments

Another key difference between Singapore’s CPF and Hong Kong’s MPF lies in how returns are generated on contributions.

In Singapore, the CPF offers risk-free, guaranteed interest rates on savings. For instance, the Ordinary Account (OA) provides an interest rate of 2.5% per annum, while the Special Account (SA), MediSave Account (MA), and Retirement Account (RA) earn a higher rate of 4% per annum. To further boost savings, the government provides an extra 1% interest on the first S$60,000 of combined CPF balances, with a cap of S$20,000 for the OA. Members aged 55 and above enjoy even higher interest, with an additional 2% on the first S$30,000 and 1% on the next S$30,000. This ensures CPF participants benefit from stable, risk-free growth on their savings.

In contrast, Hong Kong’s MPF does not provide guaranteed returns. Instead, MPF contributions must be invested in funds offered by approved fund managers, including stock and bond products. The returns depend entirely on the performance of the chosen investment funds, which are subject to market volatility. For instance, the MPF’s overall annualized net return since its inception in 2000 stands at 2.6%. This means MPF members face the possibility of fluctuating returns, with no assurance of a minimum yield.

As a result, Singapore’s CPF system provides greater security with predictable, risk-free returns, while Hong Kong’s MPF offers investment-based growth that carries both opportunity and risk.

#4 Eligibility Of Schemes

Finally, there is a key difference in eligibility between the two retirement schemes.

In Singapore, the CPF system is only available to Singapore Citizens and Permanent Residents (PRs). Foreigners residing and working in Singapore are excluded from participating in the CPF scheme.

In contrast, Hong Kong’s MPF is open to all employed residents, regardless of their residency status. This means anyone working in Hong Kong who meets the wage requirements can contribute to and benefit from the MPF scheme.

Singapore CPF Remains Top Asian Scheme Globally

While both systems serve as retirement frameworks, Singapore’s CPF has consistently outperformed Hong Kong’s MPF in global rankings. According to the 2024 Mercer CFA Institute Global Pension Index, Singapore’s retirement system is ranked 5th best in the world and stands out among Asian retirement schemes. The CPF system earned a score of 78.9 and a ranking of B+, reflecting its robustness and reliability.

In comparison, Hong Kong’s MPF system received an overall score of 63.9 and a ranking of C+. The study suggested potential improvements for the MPF, including introducing a requirement for retirees to take part in their benefits as a regular income stream rather than a lump sum.

This is because, under Hong Kong’s MPF system, individuals who reach the retirement age of 65 can choose to withdraw their savings either as a lump sum or in instalments. In contrast, Singapore’s CPF includes mechanisms to ensure that individuals do not withdraw 100% of their CPF savings in one lump sum upon reaching retirement age. Instead, the CPF system prioritises long-term financial stability through structured payouts.

In summary, while both retirement systems differ in contribution rates, fund flexibility, and eligibility criteria, Singapore’s CPF is widely regarded as a more comprehensive and sustainable model for retirement planning.

Read Also: Singapore’s CPF Is 5th Best Retirement System In The World – Here’s Why (And How It Can Further Improve)

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