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.
Cap on MPF fees not ruled out, says financial services minister
Financial services secretary will look at all options to bring down costs for savers
Phila Siu and Stuart Lau
Capping the management fees for Mandatory Provident Fund retirement accounts has not been ruled out, the financial services minister said yesterday.
Chan Ka-keung, the Secretary for Financial Services and the Treasury, said the government would not rule out any measures that could lower fees.
Chan said although the average fee had dropped from 2.1 per cent in January 2008 to 1.73 per cent last month, there was still room for fees to be reduced. Lowering the management fees had been top of the agenda for the government and the Mandatory Provident Fund Schemes Authority, he said.
"I believe there is still room for the fees to go down. But I cannot answer you right now on which level it should drop to," Chan said. "I will not rule out the possibility of any ideas to achieve the aim of optimising this policy."
Chan made the remarks after authority chairwoman Anna Wu Hung-yuk suggested last week imposing a cap on fees.
In the Legislative Council meeting yesterday, Chan pledged to step up monitoring of unscrupulous sales practices when savers get a choice of MPF providers next month. He said the licences of MPF intermediaries - companies and their staff drum up business for MPF providers - could be suspended or revoked. From November 1, employees will be able to transfer their contributions to a new provider once a year.
The Consumer Council issued a report two weeks ago which showed that MPF fees varied widely, from 0.17 per cent to 4.62 per cent, and that nearly half of MPF funds ended up in the red in the past five years.
Chan said the government had introduced a statutory regime to regulate MPF intermediaries. They would be supervised by regulators who would, for example, conduct on-the-spot inspections.
The authority can suspend or revoke the licences of intermediaries if they do not comply with the requirements. It has also set up teams to handle inquiries and complaints about MPF intermediaries.
MPF providers have voiced opposition to a cap on fees. Thomas Chan Yu-cheong, chief executive of BOCI Prudential, said yesterday it was "rare" for a government to consider imposing such a restriction. "It intervenes in market competition," Chan said. "It's most effective for the market to decide the level."
Kenrick Chung Kin-keung, MPF development director at finance company Convoy, said: "It would be difficult to set a cap because different companies face their own business environment."