The government plans to seek a change in the law to give the pensions regulator more control over the fees and number of fund choices under the Mandatory Provident Fund Schemes.
Secretary for Financial Services and the Treasury Professor Chan Ka-keung said the government would give the Mandatory Provident Fund Schemes Authority a greater say on the fee levels employees pay. More than 2.4 million employees are required to pay a monthly sum towards their retirement into the MPF schemes, which are run by banks, insurers and fund houses.
In a report issued on Monday, the authority said MPF providers charged fees averaging 1.74 per cent of assets under management; a report in May by Ernst & Young found average fees in many overseas markets were lower, with those in Australia 1.21 per cent, those in the United States 0.83 per cent and those in Chile 0.6 per cent. The authority proposed a range of measures, including a cap on fees.
Chan said the government would propose a law change to allow the authority to impose measures, such as a cap, to control fees.
"Yes, the government agrees the fees charged by the many MPF providers have been too high and the authority should have the power to impose controls on the level of fees," Chan said yesterday.
"Some may consider this violates the free market principle. But we have to remember that the MPF is a compulsory scheme - employees have to contribute whether they like it or not. Therefore the government has to make sure the regulator has the power to curb the fees," he said.
Chan also said that a change in the law would allow the authority to control the number of fund choices. He said an excessive number of fund choices was confusing for employees.