The Mandatory Provident Fund (MPF) Office is proposing that all MPF schemes include capital preservation products to protect low-income earners. The proposal is an attempt to prevent employee contributions from being eroded by administrative fees or poor investment returns. The MPF Office has been under pressure from legislators to offer more protection to lower income scheme members. Intense lobbying has led to the proposed introduction of products that carry a guaranteed return. During a Legislative Council sub-committee meeting on the MPF yesterday, MPF Office assistant director Raymond Tam Wai-man said capital preservation products would carry strict investment limitations to minimise risk. 'They will only be able to invest in bank deposits and debt securi- ties,' he said. He said in the long term, capital preservation products should outstrip inflation but that the returns could not be guaranteed. Legislator Chan Yuen criticised the proposal for failing to give enough protection to employees. 'The returns are too low. The MPF should have higher guaranteed returns to fight high inflation.' MPF Office director Pamela Tan Kam Mi-wah said employees were free to choose whether to invest in higher risk products or not. 'Capital preservation products provide a choice for employees who want to preserve their contributions. They can choose the higher return option if they are willing to take a higher risk,' she said. 'Products with a guaranteed return usually have a better return than capital preservation products. But the former requires the employee to stay in the scheme for a certain period of time before they can get their return. 'The latter allows the employee to leave at any time and still get back the contributions.' AIA Pension & Trustee Co managing director Carolyn Butler said one way around the problem would be for insurance companies to provide a guaranteed product that would pay the employees their contributions if they left the scheme after a short period. However, the employees would get better returns on their contributions if they remained in the scheme longer, she said.