Mandatory Provident Fund (MPF)

Hong Kong to hold international pension forum for first time

Platform aims to allow global providers to share views on Mandatory Provident Fund reform next year

PUBLISHED : Sunday, 06 November, 2016, 11:12pm
UPDATED : Sunday, 06 November, 2016, 11:42pm

The International Organisation of Pension Supervisors, the global body with the aim of improving private pension systems worldwide including the Mandatory Provident Fund in Hong Kong, will hold a forum in the city for the first time.

The forum, which is held three times a year, aims to allow pension regulators and industry players to exchange their views and share their experiences.

Founded in 2004 with 87 pension regulators as its members, the organisation is responsible for setting standards on regulatory issues for privately run pension schemes.

Darren McShane, the Mandatory Provident Fund Schemes Authority’s chief regulation and policy officer and executive director, has been the organisation’s technical committee chairman since 2014.

The forum will be held on Wednesday and Thursday, with Chief Secretary Carrie Lam Cheng Yuet-ngor and MPFA chairman David Wong Yau-kar giving the keynote speech on the first day.

There have been increasing calls for reform of the MPF in the city, which was launched 15 years ago, given its high fees and unsatisfactory returns. In response, the authority comes up with the default investment strategy reform, to be introduced in April next year.

There is a general lack of awareness among the population about the need to prepare for retirement financially
Sally Wong, chief executive, Hong Kong Investment Funds Association

Under the reform plan, all MPF providers need to launch a default investment strategy scheme with a fee cap of 0.75 per cent, which is about half the average current fee. It will cover those employees who have not chosen how to invest their MPF contributions.

The move has prompted many providers, including HSBC, Hang Seng Bank and Principal, to cut their MPF management fees ahead of the launch of the reform.

Sally Wong, chief executive of the Hong Kong Investment Funds Association, said the forum would provide an important platform for industry players to share their experiences in developing the default investment strategy scheme.

“I think at this function, the MPFA can share with its counterparts on how Hong Kong has come up with a model that makes use of features such as opt-out, derisking and fee-capping to effectively cater for those who don’t have the time, knowledge or interest to make investment decisions,” Wong said.

“There is a general lack of awareness among the population about the need to prepare for retirement financially ... In many jurisdictions, the investments that people make may either be too conservative with the bulk of money just tucked into deposits and thus fail to outperform salary inflation; or they tend to be short-term and speculative.”

Wong said many capital markets in Asia were not deep or broad enough and there were no sufficient instruments available to support investment for retirement purposes, which she believed were challenges facing pension fund providers in the region.

“There is much room for capacity-building both for the authorities and the industry. Also, typically, there are no tax or fiscal incentives to develop private pensions in Asia. This will need to be addressed,” she added.