• Sun
  • Dec 21, 2014
  • Updated: 6:18am
Jake's View
PUBLISHED : Sunday, 04 November, 2012, 12:00am
UPDATED : Sunday, 04 November, 2012, 4:15am

MPF chief seems determined to be an enemy of the people

'Reform' a cruel joke that continues to feather nests of bosses and big fund managers

BIO

Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.
 

"The MPF was set up in a way that was employer based and it let 250,000 employers determine the providers in order to eliminate administrative burdens. To let all 2.4 million employees freely choose their providers and make it so they could transfer at any time would effectively change the whole structure of the MPF into an employee scheme."

Diana Chan Tong Chee-ching,
Mandatory Provident Fund Schemes Authority

Will someone please explain a great mystery to me? Why is it that bureaucracies set up to serve the general public so often take the side of special interest groups against the general public?

It happens round the world. Bureaucrats put in charge of food safety routinely side with the food industry against consumers. Bureaucrats put in charge of bank supervision routinely support bail-outs of private banks with public funds. The list is exhaustive.

Prominent on the list is the MPF authority. It condones pilfering of retirement funds by fund managers appointed to invest the money. The scheme was set up so these fund managers could charge scandalously high fees. The bureaucrats appointed to supervise them let them do it.

Why? They are not bribed, I'm sure. I think perhaps the reason is just straightforward pigheadedness. But it amazes me all the same.

Take the latest pronouncements by Ms Chan on the so-called Employee Choice Arrangement, which makes a mockery of the word choice. It allows employees to pick their own fund managers for their 5 per cent contributions to the scheme but it deliberately makes this so difficult that almost all workers will leave their retirement savings with the managers picked by their employers.

And as Ms Chan makes perfectly clear in the quote above, this was the intention. She does not want to make the change to employee choice. The "reform" was pure hypocrisy.

What Ms Chan pleads is administrative burden. If every employee can pick a different manager, it will be such a headache, you know, to have to send a different sum of money for each employee to each one of hundreds of individual managers every month.

Nonsense.

For starters, no headache. There are only 40 registered MPF schemes and I imagine that 10 of them account for 98 per cent of the business. I can't be sure of the figures, however, as the MPF is also, shall we say, a little hesitant about transparency.

If, for instance, you want to know whether someone is a registered MPF intermediary, you must take HK$200 in cash to an MPF office, which will get you a certified copy of one entry on the register. If you got the wrong entry, try again. Front up another HK$200.

But Ms Chan obviously lives further in the past than most bureaucrats do. She has forgotten about computers.

What you do in the 21st century is set up the system so that at the end of every month it allocates contributions to up to 40 schemes, but probably no more than five. You then transmit this to the bank as an autopay instruction. It might take five nanoseconds, maybe six.

Every corporate accounts office regularly makes many more payments than this and with more paperwork and checking involved.

Government itself regularly sorts out millions of green, pink, and white forms. It's a government specialty. Ms Chan ought to know.

In fact, it makes things administratively easier. Under the present system an employee gets a new MPF account every time that he or she goes to a different job. Talk about headache. With real employee choice, he or she carries one account from employer to employer.

I just don't get it. Why does she side against us with the big fund managers? Will someone enlighten me, please?

jake.vanderkamp@scmp.com

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This article is now closed to comments

marstin
i found Diana a good choice to replace Franklin, think about it, Mr Leung
megafun
Diana Chan Tong Chee-ching...............PUBLIC enemy No. 1 seems a good start.
rpasea
As you noted in earlier columns, the MPF was set up for reasons totally unrelated to workers' retirement needs: a) promoting the fund industry (the true beneficiaries), b) Singapore does it (and we all know how insecure HK bureaucrats are when compared to Singaporeans) and c) pumping liquidity into the post-1997 HK market so the elites can continue to enjoy tax free dividends and capital gains (OK, this is my additional reason, not yours). Now we have a bureaucracy whose interests lie in perpetuating itself like so many others in govt. Killing the MPF might be more than CY is willing to do but making it a 100% employee focused and portable system would help (like the US IRA or 401(k) schemes).
xiaoblueleaf
Clearly the MPF Authority has failed in its job allowing more than 500 funds yielding poor returns.
 
 
 
 
 

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