MPFA proposes fee cap on pension funds
Regulator also calls for low-charge core plan for workers who fail to pick investment scheme
All Mandatory Provident Fund schemes must introduce a low-fee core fund from 2016 for employees who do not know which fund to choose for their pension contributions.
Under a plan proposed by the pensions regulator, it has for the first time also set a cap on management fees, at 0.75 per cent for the core funds, compared with a market average of about 1.4 per cent. The total fee is also limited to 1 per cent, against an average of 1.69 per cent.
There are 600,000 employees with a pension pool of HK$60 billion who do not select the funds in their MPF pension scheme.
"The initiative is aimed at addressing two major concerns of scheme members, namely high fees and not knowing how to select funds," said Anna Wu Hung-yuk, the chairwoman of the Mandatory Provident Fund Schemes Authority, as she announced a three-month consultation on the plan.
The proposal comes in response to criticisms against the high fees and poor performance of the MPF, which was introduced in 2000. The 41 schemes run by 19 providers cover 2.5 million employees, with total assets of more than HK$500 billion.
The schemes allow staff to choose how to invest their money, but 24 per cent of them have never made any choice and left it to their MPF providers to invest in default funds.