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MPFA welcomes "Choice" magazine report
The Mandatory Provident Fund Schemes Authority (MPFA) welcomes the report by Choice magazine and will seriously consider the suggestions raised.
The report provides detailed information about various aspects of the MPF schemes available in the market. The MPFA believes such information will help MPF scheme members make informed investment decisions. The Authority also welcomes the report's suggestion that scheme members should carefully consider a number of factors before deciding whether to transfer their MPF benefits to a different scheme and which scheme to choose.
The MPFA has emphasised that though the Employee Choice Arrangement (ECA) will give scheme members the right to transfer MPF benefits, they are not obliged to make a transfer, nor should they do so hastily. When deciding whether to exercise their transfer right, scheme members should consider the products (schemes and funds), services offered and fund fees, together with their personal factors. They should also pay attention to the potential risks involved in transferring their benefits.
Regarding the substantial variance in the fees and performance of MPF funds mentioned in the report, the MPFA notes that this again underscores the importance of carefully considering all factors before making an MPF investment decision.
On the five suggestions mentioned in the report, the MPFA responds as follows:
i. Providing a one-stop information platform
The report provides detailed information about various aspects of the MPF schemes available in the market. The MPFA believes such information will help MPF scheme members make informed investment decisions. The Authority also welcomes the report's suggestion that scheme members should carefully consider a number of factors before deciding whether to transfer their MPF benefits to a different scheme and which scheme to choose.
The MPFA has emphasised that though the Employee Choice Arrangement (ECA) will give scheme members the right to transfer MPF benefits, they are not obliged to make a transfer, nor should they do so hastily. When deciding whether to exercise their transfer right, scheme members should consider the products (schemes and funds), services offered and fund fees, together with their personal factors. They should also pay attention to the potential risks involved in transferring their benefits.
Regarding the substantial variance in the fees and performance of MPF funds mentioned in the report, the MPFA notes that this again underscores the importance of carefully considering all factors before making an MPF investment decision.
On the five suggestions mentioned in the report, the MPFA responds as follows:
i. Providing a one-stop information platform
At present, the MPFA website provides both a Fee Comparative Platform and a Trustee Service Comparative Platform. The two platforms are hyperlinked to the Hong Kong Investment Funds Association, which provides fund performance data for the reference of the public.
The MPFA remains open to the idea of setting up a one-stop information platform and will examine the idea further.
The MPFA remains open to the idea of setting up a one-stop information platform and will examine the idea further.
ii. Enhancing the personal financial planning service and tightening control over MPF intermediaries' sales and marketing activities
The role of MPF intermediaries is to approach employers, self-employed persons and employees to market the MPF schemes they represent. Scheme members can also obtain information and advice from MPF intermediaries about MPF schemes and funds, and seek intermediaries' help in handling MPF-related documents.
However, scheme members and employers do not have to go through MPF intermediaries, either now or after the launch of ECA. They can deal directly with their selected MPF trustees on MPF-related matters.
A statutory regulatory regime for MPF intermediaries will be implemented on 1 November to further protect scheme members' interests. Under the new regime, MPF intermediaries will be required to comply with a number of statutory conduct requirements when conducting MPF sales and marketing activities.
The MPFA has developed a set of guidelines on these conduct requirements, which requires intermediaries to, amongst others, disclose necessary information to their clients, conduct a "suitability assessment" of their clients before selling or giving advice on a particular MPF constituent fund, and provide extra care for clients with special needs.
MPF intermediaries can give advice on a particular constituent fund. However, if clients need advice on other types of personal investments, they should check whether the intermediaries have the necessary licence for giving such advice.
The MPFA will carry out an extensive publicity and education campaign to enable scheme members to have a deeper understanding of the role of MPF intermediaries and the conduct requirements they must comply with so that scheme members will be in a better position to protect their interests. In addition, the MPFA will continue to organise investment education programmes on multiple platforms to equip members with basic MPF investment knowledge to help them make informed investment decisions.
However, scheme members and employers do not have to go through MPF intermediaries, either now or after the launch of ECA. They can deal directly with their selected MPF trustees on MPF-related matters.
A statutory regulatory regime for MPF intermediaries will be implemented on 1 November to further protect scheme members' interests. Under the new regime, MPF intermediaries will be required to comply with a number of statutory conduct requirements when conducting MPF sales and marketing activities.
The MPFA has developed a set of guidelines on these conduct requirements, which requires intermediaries to, amongst others, disclose necessary information to their clients, conduct a "suitability assessment" of their clients before selling or giving advice on a particular MPF constituent fund, and provide extra care for clients with special needs.
MPF intermediaries can give advice on a particular constituent fund. However, if clients need advice on other types of personal investments, they should check whether the intermediaries have the necessary licence for giving such advice.
The MPFA will carry out an extensive publicity and education campaign to enable scheme members to have a deeper understanding of the role of MPF intermediaries and the conduct requirements they must comply with so that scheme members will be in a better position to protect their interests. In addition, the MPFA will continue to organise investment education programmes on multiple platforms to equip members with basic MPF investment knowledge to help them make informed investment decisions.
iii. Reducing MPF fund fees
The MPFA is very concerned about MPF fund fees and agrees that the pace and rate of fee reduction has not gone fast or far enough.
The MPFA has been urging MPF trustees to reduce fees and enhance the transparency of their fees. The Authority has also been looking for ways to further drive down fees.
The average fund expense ratio of MPF funds has already dropped 18% in the past four years to this September's 1.73%.
The Authority anticipates that with the launch of ECA, market competition will become keener, creating more room for fee reductions in the long run. The MPFA will continue to explore ways to streamline administrative procedures to achieve cost efficiency.
The MPFA has been urging MPF trustees to reduce fees and enhance the transparency of their fees. The Authority has also been looking for ways to further drive down fees.
The average fund expense ratio of MPF funds has already dropped 18% in the past four years to this September's 1.73%.
The Authority anticipates that with the launch of ECA, market competition will become keener, creating more room for fee reductions in the long run. The MPFA will continue to explore ways to streamline administrative procedures to achieve cost efficiency.
iv. Shortening the transfer processing time
The MPFA has been working with trustees to see if the time they take to complete benefit transfers can be shortened. Trustees have responded positively to this goal. After the launch of ECA, the MPFA will closely monitor the situation and review the relevant arrangements.
v. Working out a timetable for implementing "full portability"
The MPFA has begun studying the feasibility of implementing "full portability". However, its introduction would impact a host of administrative issues, including the current arrangement which allows severance payments or long service payments to be offset against MPF benefits. The MPFA will therefore have to examine all aspects of these issues before deciding the best way forward.
At this stage, the MPFA is focusing on preparing for the launch of ECA. It will closely monitor the impact of ECA - in relation to the effect on both the market, and on the behaviour of members and the industry in general - to assess its effectiveness, identify areas for improvement and determine the pace of reform for expanding ECA to "full portability".
At this stage, the MPFA is focusing on preparing for the launch of ECA. It will closely monitor the impact of ECA - in relation to the effect on both the market, and on the behaviour of members and the industry in general - to assess its effectiveness, identify areas for improvement and determine the pace of reform for expanding ECA to "full portability".
ECA, which will be launched on 1 November, is a significant milestone in the development of the MPF System. The new arrangement gives employees greater autonomy of choice in their MPF investments, allowing them to opt to transfer the employee's portion of mandatory contributions and investment returns ("accrued benefits") in their contribution account to an MPF trustee and scheme of their own choice once a year. Employees do not have to make any change if they wish and can keep their accrued benefits in their original scheme.
- Ends -
15 October 2012
- Ends -
15 October 2012
