Mandatory Provident Fund (MPF)

Hong Kong’s MPF pension holders ‘could save HK$200 million’ under new charter

Providers of investment funds to the scheme agree to voluntary measures aimed at cutting fees and boosting efficiency

PUBLISHED : Thursday, 24 May, 2018, 3:01pm
UPDATED : Thursday, 24 May, 2018, 11:25pm

Hong Kong’s 2.8 million holders of pensions through the city’s Mandatory Provident Fund retirement scheme could save up to a combined HK$200 million (US$25.5 million) in fees over the next year after the providers of investment funds to the scheme agreed to cut running costs and improve returns.

The 14 providers have signed up to a charter under which they agreed to voluntarily cut fees, appoint more independent directors, seek ways to improve fund performance and adopt technology to improve service and enhance safety and security.

Launched in 2000, the MPF covers 2.8 million workers and self-employed people in Hong Kong, but has come under regular criticism for charging high fees on top of poor investment returns. Struggling financial markets have not helped recently, with investors losing an average HK$677 each from their pension pots in the first quarter of this year.

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“All the MPF providers have signed the charter agreeing to make customers their priority,” said Alice Law Shing-mui, chief operating officer of the scheme’s operator the Mandatory Provident Fund Schemes Authority.

“We believe this would result in more fee reductions to achieve savings of at least HK$200 million to scheme members for the coming year. Scheme members will also benefit from the digitalisation of trustees’ services,” Law said.

Law added that the government had recently proposed to give tax incentives to encourage contributions to the MPF, and better governance of MPF providers would also help this process.

“The total net asset value of the MPF reached HK$857 billion at the end of March this year, and is expected to reach HK$1 trillion by the end of 2020,” she said. “It is important to make sure the MPF providers have a good governance standards to manage such a huge sum of retirement funds for the public.”

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She acknowledged that providers who did not follow the charter were not breaking the law, but said they would need to explain why they could not comply.

Among the over 400 investment funds in the MPF scheme, 93 have already cut fees over the past two years, some by as much as half.

Heman Wong Kwong-ming, the chief executive of the Pension Schemes Association, an industry body that includes all the biggest MPF fund providers such as HSBC, AIA and Manulife, said the charter was a good step, but questioned the claimed savings.

“The MPF charter is likely to establish a culture for providers to achieve the best benefits for members,” Wong said.

Diana Cesar, chief executive of Hong Kong office of HSBC said the lender support the MPF governance charter.

“We share its principles of good governance and are committed to upholding its core values to act in the interests of our customers and members. In 2018 and 2019, we will make further investments to improve our services, especially enhancing our customers’ digital experiences,” Cesar said.

“HSBC strives to meet the evolving retirement needs of Hong Kong people by providing them with an easier and more effective way to manage their retirement savings.