Present muddled pension fund system does not help Hong Kong workers

PUBLISHED : Sunday, 27 August, 2017, 9:03am
UPDATED : Sunday, 27 August, 2017, 10:56pm

I refer to Jake van der Kamp’s column (“High time for us to set up a simpler, less costly pension scheme”, August 10) and letters from Paul Smith of the CFA (“Hong Kong’s pension fund service providers benefit most, not the clients”, August 14) and Cheng Yan-chee of the Mandatory Provident Fund Authority (“MPF Authority is already working in central administration”, August 17).

I entirely agree with van der Kamp’s proposal concerning the MPF to “set up a central government registry that would keep all the records and act as supervisor”.

Employees could more easily have unrestricted choice of investment managers of their MPF account, but managers would have some benefit as they would not have to organise complex administration schemes to run micro accounts.

Management fees should fall as the investment managers competed to solicit business directly from employees. Every employee would have one centrally administered MPF account and not multiple accounts gathered as they changed employers.

It would remove an administrative burden from employers, particularly the small non-white collar businesses that do not have the clerical staff to manage the paperwork. It would also reduce the frequency of late or incorrect entries that incur the wrath of the MPF Authority, which levies fines, necessitating more form filling.

Of course, in time this may lead to a debate about adopting a PAYE (pay as your earn) system, but that would be a small price to bear against the present muddled system, which does no favours to both employers as well as employees.

In his August 17 letter, Mr Cheng agrees that the MPF system should be more cost-efficient and extols the virtues of an eMPF system that the authority is working to put in place. All well and good, but he skirts the core issue of the separation of MPF administration from the investment management of the MPF funds.

The objectives of this should be – 1) to give each employee a single fund that they would carry throughout their membership of the MPF; 2) to take the choice of the investment manager away from the employers and hand it to the employees; and, 3) to drive down the high management fees towards much lower fee levels, thus improving returns.

The proposed improved eMPF administrative system may indeed have a great cost-saving benefit, but this will save the administrator money and not the much-abused employees.

Antony Wood, Wan Chai