Bank of Bermuda has a long-standing presence in the Hong Kong retirement business. It has been handling the administration for a number of retirement schemes since the mid-1970s and still looks after about 170 Occupational Retirement Scheme Ordinance (Orso) schemes with more than 100,000 members. These were set up under the previous retirement legislation and co-exist with the MPF regime, typically offering better benefits to members. As well, Bank of Bermuda operates five master trusts for various MPF providers, and it administers more than 60 of the scheme's 220 approved pooled investment funds. The head of pension funds for the bank's Global Fund Services, Jimmy Pun, says: 'We are among the leading trust and administration banks in Asia. 'We provide corporate and private trust services in Hong Kong. On the trust side we also handle a lot of trustee services for mutual funds and retail funds. In Hong Kong we are one of the biggest players providing this type of service. We provide trustee service to close to 1,000 mutual funds and pension funds.' Although it has a banking licence, Bank of Bermuda has no retail or commercial banking in Hong Kong. Mr Pun says its edge lies in the proprietary system it has developed and refined to handle both its Orso and MPF administration. A single pensions team of about 120 people services both retirement schemes. 'Some of our clients have both Orso and MPF schemes and we offer them a totally seamless service,' he says. Despite talk of providers outsourcing their administration needs, Mr Pun says there are few firm deals. 'Member administration in the pension fund business is very much volume driven. In order to bring costs down, you really need the volume. We hear about some bigger players approaching smaller ones with offers to handle their administration, also about some smaller players exploring whether to contract out to reduce costs. There has been a lot of discussion and some movement, but not a lot so far.' However, he expects more farming out of administration and trustee business in future. Fees for this business were tied to the value of MPF assets, which had not expanded as fast as many players hoped because of poor market returns. 'Despite all the regular contributions, income is not growing as fast as people would like, and so there is a lot of pressure to reduce costs. You can pursue productivity opportunities or enhance your systems, or you find someone outside who can do it cheaper. I think smaller players will take this course if the economic environment doesn't turn around in the next 12 months.' MPF administration includes member records, collecting contributions and answering member enquiries, often via phone services or Internet sites. The other important back-office function relating to MPF and broader retirement funds is trusteeship, which covers fiduciary responsibility and compliance, and custody, the legal ownership of a fund's assets. Many MPF providers have a related company handling these last two functions, and some also do their own administration. Mr Pun says Orso members are beginning to demand the same communications services accorded to MPF members. In the past, the bank would communicate only with the employers running the Orso funds, and they would periodically contact members. But these days, Orso members want the up-to-the-minute information available to MPF members on interactive telephones, call centres and Internet-based services. Any widespread switching of MPF providers by employers in the next year or two is likely to be among smaller employers, who are generally more sensitive to investment performance issues than bigger employers, Mr Pun says. In future, the marketing battle for new MPF business is likely to shift, at least partly, to individual members, as the amounts in individual preserved accounts (left over accounts at previous employers' MPF providers) grow.
