MPF watchdog in talks with pension chiefs on plans to lessen risks

An overhaul of the Mandatory Provident Fund (MPF) scheme is being readied in a bid to stop 600,000 of the city's most passive pension savers being pushed into some of the most high-risk, high-cost investment schemes in the market.

Darren McShane, chief regulation and policy officer and executive director at the Mandatory Provident Fund Schemes Authority (MPFA), told the South China Morning Post that talks with pension providers on the reform plans were well advanced.

The plan is to give the roughly 25 per cent of the city's 2.4 million MPF members who do not actively make investment choices on their pension kitties a range of low-cost core funds that automatically adjust asset allocation in line with a customer's projected retirement date.

That would immediately cut the chance of a saver near retirement age seeing their MPF provider channel their cash into risky products with high charges.

The move comes after a public consultation by the MPFA won broad support for a proposal to make all MPF providers introduce a so-called "core fund" option from as early as next year. The funds would have a simple investment mix, with fees capped at 0.75 per cent.

"The consultation showed a broad agreement on the need to have a standardised core fund," McShane said.

"The MPFA is discussing with the industry the modalities of putting such funds in place."