Pension boss wants to give employees choice
The pensions regulator is considering seeking a law change to allow 2 million employees to choose the trustees of their funds, increasing the choice for workers and forcing providers to cut fees.
The Mandatory Provident Fund Schemes Authority's new chairman, Henry Fan Hung-ling, unveiled the plan yesterday at his first media briefing since taking over for Charles Lee Yeh-kwong last month.
'The average management fee of the MPF is about 2 per cent, which is reasonable at the fund size of about HK$200 billion,' he said.
'However, when the total MPF reaches HK$1 trillion or HK$2 trillion, the management fee should be lower, otherwise the 19 trustees will enjoy an excessive profit.'
Mr Fan said that since bosses were allowed to choose the MPF trustee for their staff, trustees did not feel the need to cut their fees.
'We have seen no fee reduction in the past seven years,' he said. 'This is because many MPF trustees are big banks, which have a business relationship with the bosses.'
Mr Fan said the law should be changed to let workers have the freedom to change their MPF trustee. 'If the employees have a choice, the 19 trustees will compete with each other for clients and such competition pressure would force them to cut their fee,' he said.
If the 2 per cent fee continued, the total fees paid by a worker over 40 years would be huge.
'If the management fee was reduced by half a percentage point or so, it would save the employee a lot of money,' Mr Fan said.
Sin Chung-kai, the Democratic Party's spokesman on the economy, welcomed the move and said it should be implemented as soon as possible.
'The Democrats, for the past 10 years, have fought for letting the employees and not their bosses choose,' he said. 'They may not always choose the best providers.'
Sally Wong, executive director of Hong Kong Investment Funds Association, said the fund industry in principal welcomed measures to enhance transparency and let employee have a choice, 'but we also have to achieve balance between cost and benefit of any proposed change'.
Mr Fan said allowing employees to choose would add to administrative costs paid by the employer and may face opposition from them and the industry. The authority would work out a more concrete proposal this year and hold a consultation.