Hong Kong’s compulsory retirement savings scheme will offer a new investment option from April 1 next year, setting a handling fee cap for the first time at 0.95 per cent that is subject to review within three years. The Mandatory Provident Fund Schemes Authority hopes that the new “default investment strategy”, together with its other initiatives, will be able to bring down the average handling fees of all MPF schemes to below 1 per cent from the current 1.56 per cent by April 2019. “This is a huge reform and an important milestone,” the authority’s non-executive director, Dr John Poon Cho-ming, said of the new investment option, formerly called the “core fund”. The latest reform will be the biggest change to the operation of the MPF since it was launched in December 2000. The MPF, which covers the city’s 2.5 million employees, has been criticised for poor performance and fees that are higher than in comparable overseas markets. Here is everything you need to know about the great MPF rip-off All MPF providers will need to offer a default investment strategy fund for the 700,000 accounts held by people who have not chosen how to invest contributions. The management fee would be capped at 0.75 per cent of the net asset value of the fund per year; and the recurrent out-of-pocket expenses must not be higher than 0.2 per cent – meaning a combined handling fee cap of 0.95 per cent. The new option is to be introduced because the authority is aware of complaints that the handling fees are too high, and that some people do not have time to choose a fund from a pool of more than 400 options. It’s time to think about ways to stop criminal networks from targeting cash-rich pensioners in Hong Kong Dr Poon said the 0.95 per cent fee cap would be reviewed “within three years”, with the aim of lowering it further. The authority would take into account factors including the fees of other funds by then. Pressed to elaborate on the “within three years” review time frame, managing director Diana Chan Tong Chee-ching said that a year after the new option is launched, the authority should have enough statistics to come up with a preliminary conclusion on how much the fee could be reduced further. She did not clarify whether the authority plans to at least announce or put into practice a new and lower fee cap three years later. As Hong Kong’s MPF marks its 16 anniversary, experts call for simplification, greater integration with digital technology “I hope that the default investment strategy would help drive down the fees of other funds,” Chan said. Wong Hung, an associate professor in social work at Chinese University, said whether the core fund would be able to drive down the fees of the other funds would depend on how many people went for the new option. “I don’t think many people will choose the core fund,” he said. Labour Party vice-chairman Lee Cheuk-yan said the handling fee of 0.95 per cent was still high, and that three years was “too long” for the review.