New fund law tipped as windfall for banks managing pensions

BANKS which specialise in overseeing pension funds may enjoy business growth as the Mandatory Pension Fund (MPF) law is phased in.

'We are expecting a lot of business coming to us,' Stanley Yip, Bermuda Trust pension funds director, said.

'According to government estimates, at least $30 billion to $40 billion will annually come into the MPF system.

'The bad news is, we still don't know how all the schemes are to be transferred into the MPF system, or whether or not it will be a profitable business.' Under the MPF, calculation for benefits is based on contributions, whereas many schemes now operate on the basis of the number of years employees have served. Under MPF, trustees such as the Bermuda Trust will be supervised by a team of government administrators which may increase the banks' administrative costs.

More importantly, the Government will impose a minimum capital requirement which the MPF authority will monitor. At present, under the Operational Retirement Schemes Ordinance (ORSO), trustees are not required to seek approval from the Government.

After MPF is operational, banks must get a government licence to become trustees over schemes.

Mr Yip is confident of the prospects of the Bank of Bermuda, Hong Kong's second largest pension services provider. It claims half of the Hong Kong market for unit trust administration and a smaller share of the pension fund market, currently managing about 300 investment funds and more than 1,000 retirement schemes.