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. Its pensions division benefitted from the acquisition of Standard Charter Equitor - the bank's trust unit - in 1993, as well as the need for an independent provider for mainland banks and companies. The Hong Kong office handles over US$10 billion (HK$78 billion) in assets and has a staff of 500. Primarily there are two ways to set up a retirement scheme: either as an insurance policy or a trust-based scheme. Most small-to-medium-sized firms buy into pooled schemes, usually run by insurance companies. Trust-based schemes are managed by investment banks. Daily investment decisions are made by fund managers, while the trustee is responsible for setting orders and holding title to ensure the investment guidelines are met. Costs for services and minimum investments vary by tens of millions, according to the institution. The Bank of Bermuda charges range from 35 to 65 basis points. The Mandatory Pension Fund was passed last July and the Government is aiming to make it law before the handover in 1997. A group of 22 people from various industries have been appointed to act as consultants for putting the law in place. They are expected to complete their findings next month.