MPFA expects figures on DIS shift in a few months

13 April 2017   Category: News, Asia, Global, Hong Kong   By Hui Ching-hoo

Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) says it’s too early to measure what portion of contributions to the Mandatory Provident Fund (MPF) will be diverted to the newly introduced Default Investment Strategy (DIS).

All MPF schemes have to offer the DIS, which came into effect on April 1 and is designed to automatically reduce investment risk as a member nears retirement by adjusting benefits in the two designated funds – the Core Accumulation Fund and Age 65 Plus Fund.

MPF benefits of members that do not provide investment instructions to their trustees will be automatically invested in accordance with the DIS. According to MPFA data, there were about 610,000 such accounts in January this year.

The MPF is a compulsory retirement scheme for Hong Kong workers, with total assets of HK$673 billion (US$86.6 billion) as of January 31, 2017.

An MPFA spokesperson tells Asia Asset Management (AAM) that official figures for MPF contributions shifting to the DIS will only be available in few months: “MPF trustees are now sending a DIS Re-investment Notice (DRN) to all accounts with no investment instructions and whose MPF benefits are invested according to the original default investment arrangement of the respective schemes. They will have sent all the DRNs by the end of this month.”

“Those who do not want to invest through the DIS must complete the Option 2 Form enclosed in the DRN and return it to their trustee on or before the date specified in the DRN (the 42nd day after the issuance of the DRN). Otherwise the MPF in their account will be re-invested through the DIS within 14 days after the specified date. Those who agree to invest through the DIS do not need to take any action.

“As it takes time to collect data from trustees, the number of scheme members investing through the DIS will only be available a few months later,” the spokesperson says.

KP Luk, head of Hong Kong defined-contribution business at MPF provider Fidelity International, tells AAM that less than 10% of its MPF members are in default investment arrangement.

“We believe members and the market will take some time to get familiar with the new DIS arrangement. We welcome the introduction of DIS as it standardises the default arrangement for all MPF [members], and we believe age-based investment is suitable for MPF members who do not have knowledge on retirement investment,” he says.

A spokesperson for another MPF provider, Principal Hong Kong, tells AAM that about 3% of its 570,000 MPF clients fall into the DIS category. “Apart from the DRN sent by trustees, we’ve sent another notice to the members to ensure that they’re aware of the implementation of the DIS system.”    

Belinda Luk, general manager of wealth and pensions at MPF provider Sun Life Hong Kong, tells AAM that the DIS will present opportunities for market players as members that contact their providers about details of their investments may then shift to providers with better performing products.