Hong Kong and Singapore regularly use each other as yardsticks when measuring their performance, chiefly because they have so much in common.
Both are de facto city states characterised by their pro-business stance, low tax environments and drive to establish themselves as financial hubs in Asia. So it is surprising to see how radically different their pension frameworks are.
'Hong Kong and Singapore are two of the freest economies in Asia, if not the world. But, at the same time, they have very different political systems. An example of this comes through in their pension systems,' said Hong Kong-based Carl Redondo, general manager of consultancy Hewitt Associates.
Singapore's Central Provident Fund (CPF), which was set up in 1955, operates as a compulsory government-managed retirement savings scheme.
Where the CPF differs from a pure retirement scheme is in its social security component, which allows contributors to access these funds to pay for their first home, ongoing medical costs and life insurance before retirement. In line with its social security leaning, the CPF contribution rates are high compared with international standards (20 per cent for employees and 16 per cent for employers) and are regarded as the primary retirement nest egg.
Hong Kong's Mandatory Provident Fund (MPF) is based on a free-market system, where private financial product providers manage pension savings in a highly regulated environment, with strictly controlled fund choice. Contribution rates for employees and employers are low, at 5 per cent capped at HK$2,000, reflecting the view that the MPF is only part of a total retirement savings and the government's bid to limit the costs to business.