The Mandatory Provident Fund (MPF) is a compulsory pension fund designed by the Hong Kong government as a major protection scheme for the aged and retired residents. Most employees and their employers are required to contribute monthly.
Legco support for plans to cut back on MPF charges
Greater use of electronic payments and a cap on fees among suggestions raised by authority
Most lawmakers support the pension regulator's plan to bring in measures to cut management fees for the Mandatory Provident Fund (MPF).
During the monthly meeting of the Legislative Council's financial affairs panel yesterday, a number of legislators threw their weight behind reforms proposed by the Mandatory Provident Fund Schemes Authority to trim fees for the pension scheme, which covers 2.5 million employees in the city.
Although the MPF fee level has already fallen to 1.74 per cent from 2.1 per cent in 2008, it is still high compared with Australia's 1.21 per cent, the United States' 0.83 per cent and Chile's 0.6 per cent.
Authority chairwoman Anna Wu Hung-yuk told legislators yesterday that the authority had proposed a series of measures to cut fees, including requiring MPF providers to use more electronic methods to settle payments, process data, and consolidate the millions of personal accounts in the scheme.
Analysis by a consultant for the authority showed HK$1.2 billion in potential annual cost savings by 2018 if its recommendations were put into practice. This would lower the administrative cost to 0.4 per cent from the existing 0.75 per cent.
At present, 65 per cent of the 30 million MPF transactions are conducted manually by cheque or other paper documents, which adds to cost.
The authority also proposed that funds be required to have basic low-fee fund choices as well as a cap on MPF providers' fees.
Most legislators agree with these proposals, but the panel's deputy chairman Chan Kin-por, who represents the insurance sector, which provides MPF options, said the electronic measures should be a higher priority than a fee cap.
"Adding a cap on the fee should be the last resort. We should first try to bring in measures to encourage employers to use electronic methods to handle documents and to encourage employees to consolidate their personal accounts to cut costs," Chan said.
Some union legislators also called for the government to change the law that lets employers use MPF contributions to offset long-service and severance payments.
But lawmakers from the commercial sector opposed such a move, saying small businesses would not be able to afford the rising cost due to the law change.