Pension-fund consultant William M. Mercer has blamed government restrictions on the Mandatory Provident Fund for its decision to shelve plans to be an administrative-services provider.
Mercer said yesterday entering the MPF administration market was not commercially viable because regulations on fees would limit profit margins to unsustainably low levels.
Its withdrawal leaves only two key third-party providers of administration for MPF - Bermuda Trust and CMG Asia.
Mercer said the Government, in its efforts to make the MPF scheme attractive to reluctant employers, had made it quite the opposite for those intending to provide services to clients.
'The Government is seeking global best practice and service at global best price in a highly regulated system being applied to a relatively small and inefficient market,' the company said.
'Mercer believes it is unfortunate that a system which follows a very simple concept and had the potential to encourage a diverse funds management pensions industry in Hong Kong has been made unnecessarily complex by excessive regulations and guidelines.' It cited the introduction of the controversial capital-preservation product (CPP), which all service providers in the MPF market are required to offer clients, as one of the key sticking points.
Mercer has consistently criticised the MPF Authority for its insistence on having the CPP, particularly with limits on fees that providers can charge.
