I’ve visited Hong Kong several times and stayed there on many occasions because, in my previous life, we did a lot of networking there. Hong Kong is a place that has a lot of businesses and expats who are interested in investing while they are living and working in Hong Kong and those expats who are interested in investing in the companies are based in Hong Kong.
For me, I enjoyed the times in Hong Kong, I enjoyed the fact you could feel part of a city but then very quickly get into the scenic areas. Depending on how you perceive it, I was in Hong Kong when there were a lot of protests after the agreement with China was announced. I spent a few weeks there and even with the protests, I never felt unsafe. That being said, I was fascinated by what was happening in Hong Kong, the deals being made, and what the companies were getting up to.
It is also a financial hub which naturally I am interested in as well. If you have any questions throughout this, please contact me using the button at the bottom of the page.
Pension schemes to use in Hong Kong
It’s important as an expat in Hong Kong to try and utilise your pension plans here are some of the pension schemes and private schemes that are available in Hong Kong-
Here are some of the primary pension schemes and retirement savings options available in Hong Kong:
Mandatory Provident Fund (MPF): The MPF is a compulsory pension scheme for both employees and employers in Hong Kong. Expatriates working in Hong Kong are usually required to contribute a portion of their salary to the MPF scheme. The MPF contributions are invested in a range of funds, giving you some control over your investments. You can withdraw your MPF contributions when you reach the retirement age of 65 or upon leaving Hong Kong permanently.
Occupational Retirement Schemes: Some employers in Hong Kong offer occupational retirement schemes, which are company-specific pension plans. These schemes vary in terms of contribution and vesting rules. Expats working for companies with such schemes may have the option to participate.
Deferred Annuities: You can purchase a deferred annuity policy from insurance companies in Hong Kong. These policies provide a regular income stream during retirement and can be a supplementary retirement savings option.
Voluntary Provident Fund (VPF): The VPF is an option for those who wish to make additional contributions to their retirement savings beyond the mandatory MPF contributions. It is voluntary and can be an excellent way to boost your retirement savings.
Personal Savings and Investments: As an expatriate, you can also make personal investments in Hong Kong, such as stocks, bonds, mutual funds, and real estate. These investments can serve as a source of retirement income.
Regarding the withdrawal of your pension or retirement savings when leaving Hong Kong, the rules can vary depending on the type of scheme and your specific circumstances. Here are some general guidelines:
Mandatory Provident Fund (MPF): If you leave Hong Kong permanently before reaching the retirement age of 65, you can apply for early withdrawal of your MPF contributions. However, early withdrawals may be subject to taxes and administrative fees.
Occupational Retirement Schemes: The withdrawal rules for company-specific pension schemes may vary from one employer to another. You should check with your employer or the scheme administrator to understand the terms and conditions.
Deferred Annuities: The terms for deferred annuity policies may differ among insurance companies. You should review your policy contract to understand the terms of withdrawal.
Voluntary Provident Fund (VPF): You can typically withdraw your VPF contributions when you leave Hong Kong. The specific rules may vary among providers.
Hong Kong’s Mandatory Provident Fund (MPF) Information
Hong Kong’s Mandatory Provident Fund (MPF) is a compulsory retirement savings scheme that covers both residents and expatriates working in Hong Kong. Here are some key details about the MPF scheme and how expats can use it:
Mandatory Contributions: Under the MPF scheme, both employees and employers are required to make regular contributions. As of my last knowledge update in September 2021, the employee’s contribution rate is 5% of their relevant income, while the employer is required to contribute another 5%. However, the contribution rates are subject to a maximum and minimum income cap. It’s important to check the latest rates and thresholds with the Mandatory Provident Fund Schemes Authority (MPFA) as they can change.
Self-Employed Individuals: Self-employed individuals can also voluntarily participate in the MPF scheme and make contributions.
Investment Choices: Within the MPF scheme, contributors can select from a range of approved investment funds in which to invest their contributions. These funds vary in terms of risk and return, allowing contributors to tailor their investments based on their risk tolerance and retirement goals. You can choose from conservative to aggressive investment options, including equity funds, bond funds, and mixed asset funds.
Portability: One advantage of the MPF scheme is its portability. If you change jobs within Hong Kong, your contributions can be transferred to your new employer’s MPF scheme. If you leave Hong Kong or decide to retire, you can maintain your MPF account with an approved trustee or transfer it to an MPF approved scheme in another jurisdiction. This is particularly beneficial for expats who may not stay in Hong Kong for their entire career.
Early Withdrawal: While the standard retirement age for MPF is 65, you can apply for early withdrawal under specific circumstances, including permanent departure from Hong Kong, total incapacity, terminal illness, or reaching age 60 while still employed. Early withdrawals are subject to taxes and administrative fees.
Tax Benefits: Contributions made to the MPF scheme are tax-deductible, which can provide tax savings to both employees and self-employed individuals.
Regulation and Oversight: The MPF scheme is regulated by the Mandatory Provident Fund Schemes Authority (MPFA), an independent statutory body in Hong Kong. The MPFA oversees the operation and administration of the MPF system, ensuring compliance with the regulations.
Choice of Service Providers: Expats can choose from a variety of approved MPF service providers, including banks, insurance companies, and asset management companies, to manage their MPF contributions and investments. It’s essential to research and compare providers to select one that suits your needs and offers the investment options you prefer.
Expatriates in Hong Kong can benefit from the MPF scheme by saving for their retirement, enjoying tax benefits, and having the flexibility to manage their contributions and investments. However, it’s crucial to understand the specific rules, regulations, and any recent changes to the MPF scheme, as these can impact your retirement planning. Consulting with a financial advisor or your employer’s HR department can hel you navigate the details and make informed decisions about your MPF contributions.
Voluntary providence scheme for expats information
Voluntary Contributions: The VPF is entirely voluntary, meaning that individuals are not required by law to participate. Expatriates can choose to make contributions to this fund to supplement their mandatory contributions to the Mandatory Provident Fund (MPF) or to have an additional savings vehicle for retirement.
Flexible Contribution Amounts: You have the flexibility to decide how much you want to contribute to your VPF account. There are no mandatory minimum or maximum contribution requirements. You can make periodic contributions or one-time lump-sum payments, depending on your financial situation and preferences.
Investment Options: Similar to the MPF scheme, the VPF allows you to invest your contributions in a range of approved investment funds. These funds vary in terms of risk and return, so you can choose options that align with your investment goals and risk tolerance.
Tax Benefits: Contributions to the VPF are tax-deductible under Hong Kong’s tax laws. This means that any contributions you make to the VPF can reduce your taxable income, providing potential tax savings.
Portability: Just like with the MPF scheme, the VPF offers portability. If you change employers or leave Hong Kong, you can keep your VPF account and continue making contributions or managing your investments. You can also transfer your VPF account to another approved scheme if you leave the region.
Access and Withdrawals: The VPF is designed to provide retirement income, so it’s intended for long-term savings. Typically, you can only access your VPF savings upon reaching the retirement age of 65 or under specific circumstances, such as total incapacity or terminal illness. Early withdrawals may be subject to penalties.
Choice of Service Providers: Expatriates have the freedom to choose from various approved VPF service providers in Hong Kong. These providers include banks, insurance companies, and asset management companies. When selecting a provider, consider factors such as fees, investment options, and customer service.
Regulation and Oversight: The VPF is subject to regulation and oversight by the same authorities that govern the MPF scheme, primarily the Mandatory Provident Fund Schemes Authority (MPFA).
Investment platforms for expats in Hong Kong
Interactive Brokers (IBKR):
- Interactive Brokers is a well-known global brokerage that offers a multi-currency trading platform.
- They provide access to a wide range of investment products, including stocks, options, futures, and forex.
- IBKR’s platform allows you to hold multiple currency balances within a single account, making it convenient for expatriates who want to trade in various currencies.
Saxo Bank:
- Saxo Bank is another international brokerage that serves clients in Hong Kong.
- They offer a multi-currency trading platform, which is beneficial for traders and investors who want to access various international markets.
- Saxo Bank provides access to stocks, bonds, options, futures, and other investment products.
TD Ameritrade (Now part of Charles Schwab):
- While TD Ameritrade was well-known for serving U.S.-based clients, it also attracted expatriates looking for a comprehensive trading platform.
- Charles Schwab, which acquired TD Ameritrade, offers multi-currency accounts and access to U.S. markets.
HSBC InvestDirect:
- HSBC, one of the largest banks in Hong Kong, provides an investment platform for expatriates.
- They offer multi-currency accounts, enabling you to trade in different currencies, including HKD and USD.
- The platform covers various investment products and services.
Standard Chartered:
- Standard Chartered is another prominent bank in Hong Kong that offers investment services.
- They provide multi-currency accounts and access to investment products in multiple currencies.
DBS Vickers:
- DBS Vickers is part of the DBS Bank group and offers a trading platform that caters to expatriates and local investors.
- They provide multi-currency accounts, allowing you to invest in different currencies.
Interactive Investor:
- Interactive Investor is a UK-based platform with a global presence, and they have been known to serve expatriates in Hong Kong.
- They offer multi-currency accounts and access to international markets.
What you should be aware of as an expat in Hong Kong
Expats should potentially look to avoid such as saving plans and offshore bonds (for most people), they have their uses in certain situations but a lot of the time they are expensive and have an ulterior motive for advisors.
As an expat in Hong Kong, it’s important to make informed and cost-effective investment choices to optimize your financial future. Here are some investment options and practices that you should consider avoiding, as they may come with high costs, limited flexibility, and a potential focus on commissions rather than your best interests:
- High-Cost Saving Plans and Insurance-Linked Savings Products: Avoid long-term savings plans and insurance-linked savings products that come with high fees and are often illiquid. Many of these products are sold by financial advisors who earn substantial commissions for selling them. These products can tie up your money for extended periods, making it challenging to access your funds when needed. Additionally, they tend to have high surrender charges if you want to exit the plan early.
- Offshore Bonds with High Fees: Some offshore bonds can be costly and inflexible investment options. Be cautious when considering offshore bonds that come with high fees and charges, as these can significantly erode your returns over time. Additionally, they may have limited investment choices and lock you into specific terms.
- Investments with Limited Diversification: Avoid putting all your money into a single investment, especially if it’s an illiquid asset. Diversification is a key principle of investing to spread risk. Concentrating your investments in a single asset class or product can expose you to significant risks.
- High-Commission Sales: Be cautious of financial advisors who earn high commissions on the products they recommend. High commissions can create conflicts of interest, where the advisor may prioritize their earnings over your financial goals. Ensure that any investment recommendations align with your needs and risk tolerance.
- Lack of Transparency: Avoid investments or advisors who are not transparent about fees, charges, and the underlying investments. Understand the costs associated with your investments, as hidden fees can eat into your returns.
- Investment Lock-Ins: Avoid investments that lock you into a long-term commitment with little flexibility to access your funds. Illiquid investments may not be suitable for expatriates who may need to relocate or access their capital in the future.
- Lack of Regulatory Oversight: Beware of investments that are not subject to regulatory oversight. Hong Kong’s regulatory authorities, such as the Securities and Futures Commission (SFC) and the Insurance Authority, provide some level of investor protection. Make sure any investment you consider is regulated and that the service provider is licensed.
It’s essential to conduct thorough due diligence, seek advice from reputable and independent financial advisors, and choose investment products and platforms that align with your financial goals and risk tolerance. Understand the costs associated with your investments, and consider options that offer flexibility, transparency, and a focus on your best interests rather than those of the salesperson. Additionally, periodically review and adjust your investment portfolio to ensure it remains aligned with your evolving financial objectives.
Best Banks for to use for Expats in Hong Kong
Choosing the best bank for banking and investments in Hong Kong depends on your specific financial goals and needs. Here are some banks often used by expats in Hong Kong, along with their pros and cons:
HSBC (including HSBC Expat):
Pros:
- Established and reputable global bank with a strong presence in Hong Kong.
- Offers a range of banking and investment services, including multi-currency accounts, investment products, and wealth management.
- HSBC Expat service specifically caters to expatriates and provides guidance on international financial planning.
- Access to various HSBC-managed investment funds.
Cons:
- HSBC funds may come with higher fees compared to other investment options, and you might be limited to using their proprietary funds.
- Holistic financial planning may prioritize HSBC products, which could potentially limit access to more diverse investment opportunities.
- Considered by some to be less competitive in terms of fees and account minimums for certain investment products.
Standard Chartered:
Pros:
- Another well-established bank in Hong Kong with a strong presence.
- Offers a wide range of banking and investment services.
- Provides access to international markets and a variety of investment options.
Cons:
Like HSBC, fees and account minimums for some investment products may not be as competitive as those offered by specialized brokerage firms.
DBS Bank:
Pros:
- Offers a range of banking and investment services, including multi-currency accounts and access to international markets.
- May have competitive offerings for investment products.
Cons:
May not have as extensive a global network as HSBC or Standard Chartered.
Further reading:
For more information and questions you have as an expat in Hong Kong please contact me using the button at the bottom of the page or please click on the Contact Us page where you can fill out the form and I will get back to you. If you leave your number, I can arrange a time to call when convenient.
