Operators of MPF pension schemes could be asked to slash administrative fees for all their funds, under reforms proposed by the pension regulator on Monday.
The Mandatory Provident Fund Authority’s suggestions for long-term structural reforms, released along with a consultancy report, noted that among 40 fund schemes, only 16 offer relatively low administration fees. The reform proposals call for lower administrative costs for all funds.
To help reduce the fees, the authority also recommends that trustees use more electronic and online platforms for transactions, and employees – working Hongkongers who make MPF contributions – should consolidate their different accounts with one operator.
It suggested setting a ceiling for administration costs charged for fund schemes, and introducing a not-for-profit organisation to manage funds.
The authority released its reform proposals after a consultancy study found there was room to reduce trustees’ administration fees. The study was commissioned by the authority and conducted by Ernst and Young.
It found that employees, on average, were paying trustees 1.74 per cent of about HK$400 billion in assets under management. Of that amount, 0.75 per cent – or three-sevenths – goes to pay administration fees.
That is much higher than the level in many other countries such as the United States, where it is 0.1 per cent on average.
The authority said the proposed measures could reduce the ratio to 0.4 per cent.
The authority’s chairwoman, Anna Wu Hung-yuk, said at a press conference the proposals were aimed at across-the-board reforms to increase the provident fund’s efficiency.