The Mandatory Provident Fund is a good thing, because it forces very low-income groups to save money, which they otherwise might not do.
Even though the actuaries will argue that the savings are quite inadequate to meet retirement needs, the MPF is nonetheless a step in the right direction.
However, its structural set-up, both the old and the new, is impractical, because it is inefficient and expensive to administer due to the small scale of the accounts and minute size of the contributions; therefore, it should be no surprise that the management fees are so high.
Furthermore it imposes a great administrative burden on small businesses, particularly blue-collar employees and casual labour, who cannot afford clerks to run the scheme. This will become worse if employers have to contribute to multiple managers under the new system. These small businesses are constantly being reprimanded by the MPF authority for late payment and other minor infringements, which add to the administrative hassle for all. In short, the MPF is unsatisfactory for all participants.
The solution must be for the administrative and custodial functions to be separated from the investment management functions and to be placed under one roof, preferably government-owned, somewhat akin to the Inland Revenue Department. Employers would deal entirely with this one entity and have no relationship with investment managers.
The fund management industry would then be free to focus purely on winning investment business and could charge reduced fees, as the administrative burden would have been removed.