MPF system part of multi-pillar retirement protection framework

I refer to the letter by Simon Datta (“Retirement scheme wrong term for MPF”, February 15).

Mr Datta may wish to know that the Mandatory Provident Fund Schemes Authority (MPFA) has just released a report on the 15-year investment performance of the MPF system which shows that the annualised return of the system in the 15 years to November 2015 stood at 3.1 per cent, far higher than the average inflation rate of 1.8 per cent over the same period.

As at the end of November 2015, the system had HK$590 billion in assets, of which one-fifth, or HK$114 billion, was investment returns.

The system’s return does not represent what an individual scheme member will make. Some have had a better return, some not so good. Nonetheless, the figures show that the system as a whole has added value to scheme members’ retirement savings.

MPF trustees do not and cannot invest MPF contributions “as they like” as claimed in the letter. Investment mandates are set out for each fund and the MPF legislation has rules on the kinds of investment permitted and these rules seek to protect the long-term interests of scheme members.

The letter also referred to learning about how other countries manage pension and retirement funds. Mr Datta should be pleased to know that the MPF system is designed in accordance with the multi-pillar retirement protection framework as recommended by the World Bank.

It is however only one pillar and needs to work together with other pillars to provide adequate retirement protection for the community.

To help those who may have difficulty in making MPF investment decisions, the government and MPFA have proposed mandating each scheme to provide a Default Investment Strategy (DIS) which is designed as a simplified investment option consistent with the overall objectives of retirement savings.

The DIS has also been designed having regard to international practice and will adopt a globally diversified investment strategy, automatic de-risking with age increase and have a fee control of 0.75 per cent. A bill on the introduction of the DIS is now being vetted by the legislature. We aim to have it introduced at the end of this year.

The MPF system is a key source of retirement security for the working population and the MPFA is committed to making it better.

Cheng Yan-chee, chief corporate affairs officer and executive director, Mandatory Provident Fund Schemes Authority