New | MPF reform may prune risks but could also cut returns
MPF core funds would shift investment to bonds from stocks
Proposed changes in Hong Kong’s Mandatory Provident Fund would reduce risks and make investors more conservative by putting their money into bonds.
The government will submit on Wednesday the Mandatory Provident Fund Schemes (Amendment Bill) 2015 for debate and possible vote around the middle of next year.
If approved, the law change will require all MPF providers by the end of 2016 to have at least one core fund in their MPF scheme as the default investment option.
“The core fund push will surely encourage participants to be more conservative as they move towards retirement,” said Rex Auyeung Pak-kuen, Asia head of Principal Financial, a key MPF provider in the city.
“The concept of target date and target risk funds are becoming common overseas and one benefit of course is to assist people who may not have proper information to decide.”
The reform aims to bring fees down and provide a simple investment option for 600,000 employees who currently do not choose how to invest their HK$100 billion MPF contribution. The providers now put their contribution into different funds which may carry high fees and could be in risky investments.