Some 9% of MPF accounts switched to new default strategy

18 August 2017   Category: News, Asia, Global, Hong Kong   By Asia Asset Management

Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) says 834,000, or 9% of Mandatory Provident Fund (MPF) accounts, have been switched to funds linked to the Default Investment Strategy (DIS) launched earlier this year.

The MPFA supervises MPF schemes, which are compulsory for Hong Kong workers to save for their retirement.

The DIS, which became effective on April 1, is designed to automatically reduce investment risk as a member nears 65 years of age by adjusting his or her MPFs across two mixed asset funds – the Core Accumulation Funds (CAFs) and Age 65 Plus Funds (A65Fs).

MPF trustees are required to invest all MPF benefits that do not have an investment mandate in accordance with the DIS.

As at June 30, approximately HK$15.4 billion (US$1.97 billion) of MPF assets had been reinvested in the mixed asset funds according to the new default strategy, the MPFA says in a statement.

Trustees are required to send a DIS Re-investment Notice (DRN) to MPF members that have not given investment instructions, and whose benefits were invested according to the original default investment arrangement (DIA) of their schemes before April 1, so that they can opt out of the new default strategy if they wish. The notices have to be sent out by October 1.

The MPFA says 285,000 DRNs had been sent as at June 30. About 86% of recipients had not replied and their benefits have been re-invested according to the DIS, it adds.

Cheng Yan-chee, chief corporate affairs officer and executive director of the MPFA, says in the August 16 statement that “with the concerted efforts of the MPFA and trustees, the DIS was smoothly launched and the DIAs of all MPF schemes have been standardised.”

The MPFA says its recent survey of over 1,000 members found that 65.1% had heard of the DIS, and 78.2% knew at least one of its three key features, which include globally diversified investment, automatic reduction of investment risk as scheme members approach retirement, and fee caps.

According to the MPFA, the survey findings indicate members have a “fair” understanding of the DIS.