Battle on to lure Hong Kong MPF switchers

Free ice cream, smartphone software applications and reduced fees are weapons the city's 19 Mandatory Provident Fund providers are using to lure HK$257.5 billion in workers' pension contributions.

From today, the city's 2.4 million employees can choose their own pension fund providers, something they have not been able to do since the scheme began 12 years ago. The MPF requires workers and employers to each pay 5 per cent of salary, up to a combined HK$2,500 a month, to MPF schemes run by banks, insurers and fund companies.

Since the MPF was set up in 2000 only employers have been able to choose the providers. Workers unhappy with the fees and services of the providers had to stick with the bosses' choice. This has led to a lack of competitiveness among providers and criticism that fees were too high.

The reform to allow employees to choose their own provider and shift their contribution once a year will make a difference.

Overseas experience shows 10 per cent of workers will opt for a shift in pension providers when they are allowed to do so, which means there may be HK$26 billion worth of assets changing over. This explains why providers are keen on offering incentives, presenting a golden opportunity for smaller players to expand their market share.

"Allowing employees to choose their own providers will add competitive pressure and improve service quality and performance," said Alice Law Shing-mui, executive director of the Mandatory Provident Fund Schemes Authority (MPFA).