http://blogs.wsj.com/hong-kong

Hong Kong’s pension plan turned 10 years old this month. But before any candles were blown, the chairwoman of the Mandatory Provident Fund Schemes Authority wished for some changes.

Anna Wu, who heads the MPF Schemes Authority, said last week in a press conference that fees for these retirement plans are too high and argued that they should be lowered. MPF fees average from 1.1% to 2.4% of the amount invested. By comparison, mutual funds in the U.S.’s 401(k) pension plan often charge between 0.25% and 1%.

More than 2.45 million participants have contributed 345 billion Hong Kong dollars (US$44.4 billion) to the Hong Kong government’s retirement system. All full-time and part-time employees on Hong Kong payrolls partake in this compulsory retirement plan, with 5% or their income — capped at HK$1,000 — deducted each month. Employers are required to match contributions one for one. The sum is invested in a variety of funds selected by the employee with different degrees of risk, such as bank deposits (low risk) and stocks (high risk). By comparison, the maximum contribution to Singapore’s retirement plan, the Central Provident Fund, is 20% of an employee’s income, and the employer’s maximum matching level is 15% of the employee’s income.

Calculations by ipac Financial Planning Hong Kong Ltd. show contributing the maximum amount each month from the age of 20 until the retirement age of 65 won’t be enough to live on for nine more years, especially since Hong Kong’s average lifespan is the fifth highest in the world, behind Macau, Andorra, Japan and Singapore.

Below is a comparison of Hong Kong and Singapore’s retirement plans.

Hong Kong’s Mandatory Provident Fund
Established: 2000
Coverage for: Full-time and part-time employees in Hong Kong aged 18 to 65
Contributions: 5% of income, capped at HK$1,000 per month, 100% matched by employer
Taxed: Gains taxed up to 15%
Fees: On average 1.1% to 2.4% of net asset value
Age one can withdraw: 65
Average Hong Kong life expectancy: 81.86
Minimum balance upon withdrawal: none

Singapore’s Central Provident Fund
Established: 1955
Coverage for: All temporary, part-time and full time employees who are Singaporean citizens and permanent residents
Contributions: 5% to 20% of employees’ income. Employers match 5.5% to 15% of income. Rates are set by
the government, varying depending on the age of the employee.
Taxed: Profits and earned interest untaxed. Dividends taxed at individual tax rate, which ranges from 0% to 20% based on income.
Fees: Variable from 0% to 6% of net asset value
Age one can withdraw: 55
Average Singapore life expectancy: 81.98 years
Minimum balance upon withdrawal: 123,000 Singaporean dollars (US$93,456)

Source: MPF Schemes Authority, Central Provident Fund Board, World Bank, Mercer, ipac Financial Planning