Hong Kong is a vibrant city with a wealth of culture, low taxes, and opportunity. So, it’s no surprise that people from around the world choose to live here.

Indeed, Hong Kong has been a popular expat destination for many years, with people relocating from various locations, including the UK, Australia and the US.

Wherever you call home, planning for your retirement requires careful thought. If you’re living abroad and hold global assets, you may need to navigate tax and pension rules in multiple countries.

Indeed, taking advantage of the higher disposable incomes many of us enjoy whilst living in Hong Kong, you can set aside a relatively sizeable sum each month to accumulate a considerable personal balance sheet. The sooner you begin to save, the more time you’ll have to accumulate the wealth you need to fund your dream retirement lifestyle

So, read on to discover five top tactical tips for improving your retirement finances if you’re a British, Australian, or American expat living in Hong Kong.

1. Build your investment portfolio

Paying yourself before you pay others is a good long-term strategy. In other words, religiously set aside a portion of your disposable income for your future before you have the chance to spend it. Perhaps start by simply saving cash in a separate savings account with your bank. However, investing usually delivers higher returns than cash savings over time, and will form an important part of your retirement portfolio.

Indeed, investing for the long term helps you ride out any periods of market volatility and give your invested assets more time to potentially grow, thanks to the powerful effect of compound returns.

Compounding allows your wealth to benefit from returns on both your original investment and on returns you received previously. Just as a snowball gradually grows larger as it rolls downhill gathering more snow, over time, compounding returns could help your investments grow.

While investing carries a degree of risk, diversifying your portfolio could help to protect your wealth against potential losses.

In simple terms, diversification means spreading your wealth across different asset classes, sectors, and geographical regions. So, if one area of your investment portfolio falls, other parts may rise to provide an overall gain.

At BMP Wealth, our professional advisers can help you work out how much you need to save. We’ll also align your investments with your long-term lifestyle goals to help you build the wealth you need. And assist you in devising a tax-efficient income in retirement.

2. Increase contributions to your Mandatory Provident Fund

Making the most of the Mandatory Provident Fund (MPF) provides an excellent opportunity to boost your retirement finances.

The MPF is a government-mandated low-cost savings scheme designed to provide retirement savings for employed and self-employed residents in Hong Kong. While some exceptions exist, participation is mandatory for most employers, and employees aged between 18 and 64.

The current mandatory contribution rate is 5% (2024/25) of your relevant income, subject to the minimum and maximum income levels. And employers are required to match your contributions.

Since MPF contributions are tax-deductible up to specified limits, they may prove an extremely attractive way to build your retirement wealth.

Increasing your contributions could help to reduce your taxable income and lower your overall tax liability. As such, you might want to consider making additional Tax Deductible Voluntary Contributions (TVC) to boost your retirement fund. TVCs are currently capped at HKD60,000 per tax year (2024/25).

If you’re employed, it may be worth discussing this with your employer as they might be willing to match your increased voluntary payments – employers can contribute up to 15% of your total annual emoluments.

Hong Kong’s double tax treaty with the UK provides further incentives for British expats. This agreement means that when you retire in the UK, you could draw an income from your MPF without paying UK taxes because your MPF is taxable in Hong Kong – where it is currently free of tax.

At the time of writing, Hong Kong does not currently have a similar double tax treaty with Australia. However, Australia’s Chamber of Commerce proposed a double taxation in January 2024, so this may eventually bring about change.

Meanwhile, Americans continue to be taxed on their worldwide income. As such – and without a tax treaty with Hong Kong – the Hong Kong MPF income is taxable in the US. Unfortunately, the contributions made by a Hong Kong employer to an American employee’s MPF are also considered taxable in the US, and so is any investment growth.

3. Consider taking out Private Placement Life Insurance

Private Placement Life Insurance (PPLI) – previously known as a “portfolio bond” – is an offshore product that combines the benefits of life insurance with investment opportunities that may not be available via traditional structures.

A PPLI offers a tax-efficient way for you to grow and preserve your wealth while also benefiting from the reassuring protection of life insurance.

Investments held within your PPLI policy grow without incurring immediate taxation. This allows your funds to better harness the power of compound interest, allowing your investments greater potential to grow.

If you’re a UK domicile returning to the UK, you could draw down up to 5% of your initial investment, and any additional investments you make, without incurring an Income Tax charge for up to 20 years.

Plus, any unused allowance in a single tax year can be carried forward. This could allow you, for example, to withdraw 4% every year for 25 years. Any amounts above this allowance are subject to Income Tax. However, using policy segmentations or tax calculations – such as top-slicing and time apportionment – could allow you to greatly reduce your tax liability.

If you’re an Australian domicile returning to your home country, withdrawals from your PPLI will be tax-free, once the policy has been running for 10 years.

For Americans, provided the PPLI is set up correctly and held in a specific type of trust, any gains made on investments held within a PPLI aren’t usually taxable. However, the underlying investments need to be US-compliant. Otherwise, they may fall foul of the Passive Foreign Investment Company (PFIC) regulations and suffer aggressive taxation.

So, if you’re an American expat, it’s important to seek professional financial and legal advice to ensure everything is compliant.

A PPLI can also provide an effective estate planning tool since it allows you to pass on your wealth tax-efficiently by using beneficiaries or trusts.

However, because the rules vary across jurisdictions and can be complex, it’s wise to seek professional advice.

At BMP Wealth, we are experts in building, managing, and preserving the wealth of Hong Kong’s international community and can help you structure a PPLI policy to suit your retirement and succession needs.

4. Make the most of the State Pension in your home country

For British residents and expats, the amount you’ll receive as a State Pension is usually based on your National Insurance (NI) record.

If you have any gaps in your record, it could be highly beneficial to top up your State Pension by making voluntary contributions while you’re living in Hong Kong.

Provided you meet the criteria set by the government, you can make either:

• Class 2 contributions – £3.45 per week in the 2024/25 tax year
• Class 3 contributions – £17.45 per week in the 2024/25 tax year.

You can also retrospectively pay for NI credits to fill any gaps in your NI record from previous years. Usually, you must top up your pension within six years of missing the original payment.

However, there’s currently a unique opportunity to make up for even older gaps, as the deadline for making voluntary NICs as far as the 2006/07 tax year has been extended to 5 April 2025.

The amount you’ll need to pay to fill a gap in previous years will vary, yet with the full rate of the new State Pension currently standing at £221.20 a week, you may find that this represents a superb return on investment.

Even paying the highest rate under Class 3, it won’t take you long to get your top up back once you start drawing your State Pension. When you pass this tipping point, your State Pension – which you’ll receive for the rest of your life – is pure profit.

The benefits to your retirement income of gaining access to the full UK State Pension could be significant, so you may want to seize this opportunity to plug any gaps in your NI record.

If you’d like to learn more if it would be a suitable step for you, please get in touch.

Read more: Is “buying” additional UK State Pension credits a good idea?

Whilst Australia doesn’t have the same State Pension system as the UK, as an Australian expat you can contribute to the Australian Superannuation scheme which could provide a tax-free income in retirement.

You can make what are known as non-concessional contributions, which are capped at an annual amount of AUD120,000, from 1 July 2024. You could also make up for previous unpaid years and bring forward a maximum of three years’ worth of non-concessional contributions.

American expats are required to contribute to their Social Security system whilst living abroad if they are self-employed or employed by a US organisation.

The US has totalisation agreements with around 30 countries for the purpose of avoiding double taxation of income with respect to Social Security. Unfortunately, Hong Kong doesn’t have such an agreement with the US, but you may be able to reduce your taxes by using the foreign earned income exclusion or the Foreign Tax Credit.

As illustrated above, maximising your pension entitlement could significantly boost your retirement savings, so it’s well worth exploring your entitlement and factoring this in to your long-term financial plan.

5. Start planning for your retirement as early as possible

Time is your friend. The sooner you start planning your retirement finances, the more potential your wealth has to grow.

Thanks to the power of compound interest, discussed above, even a modest investment could grow into a healthy savings pot over time.

What’s more, by starting to plan for your retirement as early as possible, you’re likely to have more opportunities to boost your savings, for example through voluntary State Pension contributions and investing.

At BMP Wealth, we can use cutting edge financial planning tools, such as cashflow modelling, to help you:

• Assess your current financial situation
• Project your future needs
• Develop a plan for addressing any areas where there could be a shortfall.

Understanding your finances and your retirement goals in this way could allow you to build towards your desired retirement lifestyle throughout your career.

Get in touch

We have years of experience working with expats living in Hong Kong and can help you build the wealth you need for the retirement lifestyle of your dreams.

Please email info@bmpwealth.com or call +852 3975 2878.