MPF

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. A 2012 study by the Consumer Council shows that almost half of the MPF funds have posted losses in each of the past five years.

News›Hong Kong

CONSUMER COUNCIL

Nearly half of MPF funds lost money, says watchdog

Monday, 15 October, 2012, 4:59pm

Lai Ying-kit

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Ron Hui of the Consumer Council issues the agency's findings in North Point on Monday. Photo: Edward Wong

Almost half of all Mandatory Provident Fund investments have lost money over the past five years, the Consumer Council said on Monday.

The council studied the performance of 523 funds, contained in 39 schemes from 15 MPF providers, from July to last month.

Of the 341 funds that provided data, 159, or 46 per cent, posted an average loss in each of the past five years.

A Japan stock fund performed worst – losing 14.04 per cent on average every year. The best performer was a global bond fund that posted an annual average gain of 5.81 per cent.

The council also found that the fees charged by MPF providers varied significantly, from 0.17 per cent of total assets to 4.62 per cent.

Council chief executive Connie Lau Yin-hing said larger fees did not guarantee better returns from a fund.

“Some can achieve good performance and, at the same time, charge fees at a lower-than-average level,” she said.

There was room to lower MPF fees because more operations had been computerised, she said.

The MPF is a compulsory pension scheme established in December 2000. It requires employees to pay five per cent of their salary, which is matched by their employer – up to a combined total HK$2,500 a month – to an MPF provider such as a bank or fund company.

In November, employees will be able to transfer all of their contributions to a new provider of their choice once a year.

A major criticism of the MPF scheme has been that employers choose the providers and employees cannot switch even if they are unhappy with the services, fees or performance.

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This article is now closed to comments

Camel Oct 19th 2012
1:08am

All retirement fund scheme in all countries of the world lose money or what do you think the government is doing with all those money contributed into the pension scheme set up by the state? sit on it?

mskelly Oct 17th 2012
8:28am

While I agree with angloaussie and others I think the government lives on another planet and our self-confidence is an affront to them and those who make their money in other ways than hard slog and traditional entrepreneurship. Imagine telling Donald et all we think their prize intelligence of what is good for us is only good for them and the insurance and fund management lobby with whom they no doubt have many lunches in high places with no accountability for the cost. Another junket some would say.
Ground control to Major Tom! Sadly we are on different planets... and we must pull the plug!
Shane Kelly

SpeakFreely Oct 16th 2012
10:49pm

MPF is generally good if u pick a fund not loosing money at least. Why? Assume is $100 and your employer contributed another $100 so will be total $200. Assuming admins ration fee is 2% you still have $196 vs $100 you contributed!
The issue with the funds are terrible performance and trading fees for fund managers are high in HK as Hk is very expensive in stock trading. HK is a place of rip off in trading in my word. HK is the least free econcomy in the world if yiu will. To illustrate if you trade US stock say apple for 100 shares at us$700 a share for a total value of us$70k, I pay only us$1 for commission. In HK we pay 0.8% that will be US$560 !!! That also explain why our fund fees are so high!

heidi_poon Oct 15th 2012
10:07pm

MPF is not really a praticable way to accumulate our money. A delayed fund price quoting can induce great loss of money. I prefer real time transaction. Time value of money concept is of paramount important!

llleung Oct 15th 2012
9:27pm

the overall fifty per cent loss is not a good result which dissatisfies many Hong Kong MPF participators.
over years, discontent mounts because of this. more transparency about the operation of different funds and management companies is deadly needed.

angloaussie Oct 15th 2012
8:56pm

The practical case is that the Mandatory Provident Fund Authority ("MPFA") leadership has (i) been co-opted by the bank and insurance company MPF providers, (ii) feather-bedded its own bureaucrats, and accordingly (iii) miserably failed in its fiduciary duty to the ordinary, financially-unsophisticated, working Hong Kong man and woman who are the INVOLUNTARY account holders in this MPF scheme.
The MPFA has had twelve years to refine the system, but surely very few working Hong Kong men and women will be enjoying a more secure and comfortable retirement due to the MPFA and the bank and insurance company MPF providers.
Other commentators have already noted that we face yet another economic downturn when securities appreciation can be expected to the uneven and small, if positive at all. It is time to:
a) either, shut this MPF structure down and return the residue to working Hong Kong men and women to manage as they see fit - my preferred option
b) or, radically restructure the MPFA leadership with emphasis upon (i) its fiduciary duty and accountability to the INVOLUNTARY working Hong Kong men and women account holders, and (ii) protecting the INVOLUNTARY working Hong Kong men and women account holders against the depredations of the bank and insurance company MPF providers
Should b) be adopted, then there clearly needs to be (i) much greater transparency of fund performance and expenses, and (ii) direct incentives and sanctions on the MPF providers

dynamco Oct 15th 2012
8:50pm

and just check how many of the funds have tobacco investments ! and HK Government allows this contrary to WHO FCTC Treaty requirements !

superdx Oct 15th 2012
7:59pm

Most people I know have lost money on their MPF. This is not anyway guaranteeing a safe retirement at all, and markets continue to look to perform weakly in the next 10 years.
In fact, MPF on average may be costing Hong Kong residents. These statistics should be published. Instead all that is posted is MPF gains as a whole. The question is whether or not that the funds that do gain are actually picked by people.
In reality, the vast of majority of HK are not investment professionals. With TV advertisements telling audiences to carefully read the fine print and not sign if they are unclear, can I not sign because I'm also very unclear about MPF as a retirement savings scheme? In particular, I'm unclear why a retirement fund has the possibility to lose money.

olliereid Oct 15th 2012
5:02pm

so the story here is that over half of the MPF funds made money?