The government is moving ahead with plans to give employees more control over how their retirement savings are managed under the eight-year-old Mandatory Provident Fund scheme. The proposal was being drafted and Legislative Council approval for it would be sought as soon as possible, the government said. Employees could start switching their contributions to a provider of their choice within a few months of the Legislative Council approving it. Contributions from employers would not be included. The proposal was designed 'to promote market competition and encourage employees to take a more active interest in their MPF investments', Chief Executive Donald Tsang Yam-kuen said. Employers and employees each contribute 5 per cent of an employee's monthly salary, up to a maximum of HK$1,000, to MPF accounts. The employer chooses the MPF provider, while the employee decides in which of the provider's funds to invest the contributions. Chan Ka-lok, head of the finance department at the University of Science and Technology, said employees would select schemes which suited them - and those with lower management fees - resulting in greater competition among MPF providers. 'For employees, the management fee is one of the most important considerations when choosing a provider. This will create some pressure on providers to lower their charges,' Professor Chan said. 'Of course, employees may also consider the service quality of the providers, too.' One possible downside of switching providers is the administrative fees payable. But Professor Chan said this would not deter people. Funds heavily invested in equities have suffered steep losses as a result of recent market volatility, highlighting the need to revise the fee structure. Data from fund research firm Lipper shows Hong Kong's retirement funds lost an average of 8.36 per cent of their value last month. Equity funds lost an average of 13.58 per cent and mixed-asset funds an average of 7.58 per cent. Money-market funds had marginal losses and bond funds lost 1.98 per cent. The average fund lost 16.78 per cent between May and September, the biggest drop since the scheme was introduced in 2000. Fidelity Hong Kong, which has more than 200,000 MPF account holders, welcomed the new policy, saying it would give employees more flexibility. But Fidelity director Daisy Ho Wai-fun said the industry might become less competitive. 'There are about 19 trustees in Hong Kong ... and the market is evolving. There's a chance [the industry] will not be as competitive because some players may consolidate. It will depend on how the policy is implemented,' she said.