MPF pension system has been a key pillar of retirement protection in Hong Kong

PUBLISHED : Wednesday, 26 July, 2017, 4:23pm
UPDATED : Wednesday, 26 July, 2017, 8:29pm

I refer to Jake van der Kamp’s column (“Strange are the ways that pension plans are managed”, July 18).

There were good reasons for giving employers the right to choose Mandatory Provident Fund schemes for their employees when the MPF system was set up in 2000.

This arrangement was administratively simpler and more cost-efficient, and facilitated the efficient launch of the system back then.

However, this does not mean employees have no say in how to invest their MPF benefits. Employers choose the schemes for them, but do not pick the funds on their behalf. Each employee is free to decide on their own investment portfolio.

To boost market competition and to let employees have greater control over their MPF investment, we introduced the Employee Choice Arrangement (ECA) in 2012, which allows employees to transfer the MPF benefits attributed to their own (not employers’, as your columnist wrongly said) mandatory contributions to a scheme of their own choice once every year.

But the fee level, which has dropped 25 per cent in the past decade, is still high and the MPF Authority (MPFA) is keenly aware of it. The launch of the Default Investment Strategy with a fee cap in April is our latest initiative to further push fees down.

Fees are not just a concern for us or employees. Employers who make MPF contributions for their staff have an interest in the matter too. To say employers care nothing about fund fees, as your columnist alleged, can hardly be true. Many employers we have met are anxious to see more fee reductions.

We must stress that despite the constraints of the ECA, about 70 per cent of the MPF assets, or over HK$500 billion as of May, is freely transferable. On top of about half of the assets in contribution accounts, all the assets in personal accounts can be transferred to other MPF schemes.

No pension system is perfect and the MPF system also has its own limitations. Yet the MPF has been a key pillar of Hong Kong’s retirement protection system. It now has more than

HK$700 billion assets, four million scheme members, and an employer participation rate of nearly 100 per cent. There is still room for improving the MPF system and the MPFA is committed to making it better.

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