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MPFA Chairman Mrs Ayesha Macpherson Lau today (24 October) published her latest blog post, in which she pointed out that the passage of the Mandatory Provident Fund Schemes (Amendment) Bill 2021 (the Bill) by the Legislative Council on this past Friday provided the legal basis to further facilitate the development and implementation of the eMPF Platform project.  This marked an important milestone for this mega project concerning the local working population and employers.

Mrs Lau highlighted that the eMPF Platform was currently the MPFA’s most important project. The Platform will standardize, streamline and automate the administration work processes of MPF schemes, thus increasing their operational efficiency. This will help employees and employers handle MPF matters more easily, and the cost savings arising from the electronic platform will create room for further fee reduction, thus benefiting MPF scheme members directly.

While acknowledging public concern over the fees of MPF funds, Mrs Lau said the MPFA had been trying to encourage fee reduction through different measures over the years, including enhancing the transparency of MPF fund fees, providing tools for fee comparisons, and introducing the Employee Choice Arrangement (aka semi-portability) to enhance market competition. The average fund expense ratio of MPF funds dropped by 30% from 2.1% in 2007 to the current level of 1.43%. However, MPFA considered that there is still room for further reduction of MPF fund fees. 

As Mrs Lau pointed out, the “straight pass-on” requirement of the Bill stipulated that administration fee of MPF schemes charged by the trustees must not exceed the Platform fees they pay to the eMPF Platform Company, so the cost savings will be “passed straight on”, leading to a corresponding reduction by the trustees in their overall fees and charges, which will benefit MPF scheme members directly. In the first two years after the implementation of the eMPF Platform, an average reduction of about 30% in the scheme administration fee payable by scheme members is expected. The project is estimated to achieve cumulative administration cost savings of $30 billion to $40 billion over a 10-year period. 

Other legislative amendments covered by the Bill include a review of the out-of-pocket expenses cap for default investment strategy (DIS) funds, which will be lowered from 0.2% to 0.1% of the net asset value of the fund.

The MPFA aims to complete the construction of the eMPF Platform by the end of 2022 at the earliest.  Subject to the orderly transition of the 27 MPF schemes under 13 trustees from early 2023 at the earliest, the eMPF Platform will come into full operation in early 2025 at the earliest. Mrs Lau said she was confident that the eMPF Platform would be a digital platform for coping with the future development needs and create a win-win situation for all MPF stakeholders.

For the full version of the article, please visit the MPFA blog. The blog is in Chinese only.

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24 October 2021