MPF added value to working population’s retirement savings

PUBLISHED : Monday, 07 November, 2016, 5:17pm
UPDATED : Tuesday, 08 November, 2016, 11:52am

I refer to Jake van der Kamp’s column (“The MPF will make your bankers rich, but not you”, October 16).

He asserted that “the MPF people have not seen fit to disclose” pre-2004 Mandatory Provident Fund returns and wondered if “this has to do with an embarrassingly poor performance” over those years.

The MPF Authority attaches great importance to transparency.

We publish quarterly statistics reports which set out, among others, the total contributions and the net investment returns of the MPF system since the latter’s inception in December 2000. The rates of return of the two financial years 2001-02 and 2002-03 were vastly different, with one being -10.7 per cent and the other 22 per cent. These figures, and many others, are available on the authority’s website.

MPF schemes are not just simple investment products. The schemes are operated by trustees which provide services going far beyond simple investment management. The trustees have to collect and allocate employer contributions, assist in chasing employers for outstanding contributions, provide statutory reporting to regulators, administer how and when withdrawals can be made.

These are some of the tasks and associated costs that come with a mandatory pension system that do not apply in the context of a simple investment product.

It is true that employees cannot change the MPF scheme their employers have enrolled in but, as your columnist rightly pointed out earlier, since the implementation of the Employee Choice Arrangement (ECA) in November 2012, employees can transfer the MPF benefits arising from their own contributions to a scheme of their choice. With ECA, the vast majority of MPF benefits, about 70 per cent, is fully portable and thousands have moved their MPF benefits to another scheme.

In operation for almost 16 years, the MPF system has accumulated over HK$650 billion in assets and an annualised rate of return of 3.3 per cent. Though 3.3 per cent is a system-wide figure and does not represent what an individual scheme member gets, it shows beyond doubt that the system has added value to the working population’s retirement savings.

Your readers may wish to know that while there has yet to be a consensus on raising the mandatory contribution rate, the amount of voluntary contributions tripled in 10 years to HK$8.7 billion in 2015.

It is nothing less than a clear sign of scheme members’ growing confidence in the MPF system.

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