Principal hitches ride on Asia pension reform

Principal Financial, one of the largest US providers of pension plans, has its eye on Asia in light of the many initiatives for pension reform in the region and the ageing population.

Rex Auyeung Pak-kuen, the group's Asia president, told the South China Morning Post that many Asian economies, including mainland China and Malaysia, were reforming their pension plan systems. Hong Kong's Mandatory Provident Fund scheme is also carrying out a reform to allow employees to have more control over their choice of providers.

"We have seen a lot of reform plans going on among the Asia markets as the governments in the region have to develop privately run pension plans to prepare for the retirement needs of the ageing population," he said. "This has given a lot of opportunities to pension fund providers like Principal."

Principal, which is one of the largest pension plan providers in defined contribution schemes - similar to the MPF - that allow employers and employees to contribute to a pension plan run by a bank, insurance company or fund house, established its first Asia office in Hong Kong in 1996. The city was then preparing to introduce the MPF scheme in 2000.

The firm expanded in mainland China through a joint venture and set up offices in India, Malaysia, Thailand, Indonesia and Singapore to offer pension plans and investment funds. Its assets under management in Asia make up 5 per cent of its US$456 billion in global assets under management.

"We expect the assets under management in Asia to increase to 10 to 15 per cent of the global total in 10 to 15 years' time," Auyeung said.