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Mandatory Provident Fund (MPF)

With Hong Kong MPF set to reach HK$1tr by 2020, top six providers start association to chart scheme’s course

eMPF, increased voluntary contributions and MPF withdrawals for property purchases on Pension Schemes Association’s agenda

PUBLISHED : Sunday, 01 April, 2018, 7:03pm
UPDATED : Sunday, 01 April, 2018, 10:58pm

Six of the largest Mandatory Provident Fund providers in Hong Kong have set up an industry body to work with the government on the development of the sector, as the city’s compulsory retirement scheme is on course to reaching HK$1 trillion (US$127.84 billion) by 2020. 

The Pension Schemes Association, established last week, is the first ever industry body for MPF providers. The association’s founding members represent more than 80 per cent of the market – the MPF has HK$843 billion (US$107.45 billion) in assets under management. 

“When the MPF was first set up in 2000, the amount of money in the scheme was very little. Eighteen years on, it has accumulated to a huge sum. It is time for the key players to set up an industry body to voice their concerns, and to work with the government on the development of the scheme,” Heman Wong Kwong-ming, the chief executive of Pension Schemes Association, said in an interview with the South China Morning Post

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The six providers include HSBC, AIA, Manulife, FIL Investment Management, Principal Trust Company (Asia) and Sun Life Hong Kong. But Wong said he expected more providers to join the association.

A total of 14 providers offer the MPF scheme, which is a compulsory retirement plan that covers 2.8 million employees in Hong Kong. Employers and employees each contribute 5 per cent of the salary of the staff member to an MPF scheme managed by one of the providers, which include banks, insurance companies and fund managers.

The providers administer the contributions and allocate the money into different investment funds according to the employee’s choice. They also handle the withdrawal of money when the employee reaches the age of 65 years.

“The providers need to handle a lot of these administrative tasks. The association will work closely with the Mandatory Provident Fund Schemes Authority to launch the eMPF scheme, which will introduce more electronic methods to handle such tasks, to cut down costs and enhance efficiency,” said Wong.

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The association will also work with the MPFA and the government to encourage employees to make more voluntarily contributions.

When the MPF was first set up in 2000, the amount of money in the scheme was very little ... It is time for the key players to set up an industry body to voice their concerns, and to work with the government on the development of the scheme
Heman Wong Kwong-ming, chief executive, Pension Schemes Association

“The MPF contributions level is lower than in many other overseas markets. It would be good if employees were to make more voluntarily contributions,” said Wong.

He said he supported recent actions by the MPFA that require MPF providers to monitor employees’ special voluntarily contributions, as some of these contributions were withdrawn in just about a year.

“The MPF should be for the purpose of retirement protection. The scheme should not be used as a short-term investment vehicle,” he said. 

The MPFA was also studying the possibility of letting employees withdraw their contributions to buy property. Wong said the association would work with the authority on this proposal.

Wong, himself a retiree, headed the treasury operations of the MPFA between 2000 and 2007.

The 63-year-old has been retired for a year and was the executive director of the Hospital Authority Provident Fund schemes, the largest pension scheme in Hong Kong by asset size.

He started his career as a bond salesman and trader for many banks, and later moved into pension investments, where he stayed for 17 years. After the MPFA, he worked with the Hospital Authority from 2007 to 2016.

“I am willing to return to work as I am very passionate about the MPF. Retirement planning is very important to the Hong Kong population. The Pension Schemes Association will work hard to achieve the improvement of the MPF,” he said.

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