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.
Nearly half of MPF funds lost money, says watchdog
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.