MPF has “room for improvement”, says Hong Kong financial secretary

26 May 2014   Category: News, Asia, Global, Hong Kong   By Daniel Shane

Hong Kong’s Financial Secretary John Tsang has said that the territory’s Mandatory Provident Fund (MPF) has “a lot of room for improvement” and “maybe now is the right time once again to review” the compulsory pension programme.

In a post on his blog, Mr. Tsang highlighted issues with retirement security for low-income workers and the unemployed under the MPF scheme, while adding that “no system is perfect”.

However, he emphasised improvements that have been made to the retirement security programme since it was introduced. “Over a period of time, we have increased market competition, improved the transparency of the MPF scheme, thereby pushing down MPF fees,” Mr. Tsang said.

The law provisioning for Hong Kong’s MPF programme were enacted in 1995, with the scheme coming into operation five years later. Prior to its introduction, only about one-third of Hong Kong’s population had some form of retirement protection. According to statistics from the Hong Kong government, about 85% of the working population is now covered by some form of pension scheme.

Mr. Tsang said that the Hong Kong government would next seek to launch core funds, which would help employees “better balance between investment risk and return” and help to reduce fund charges.

“Maybe now is the right time once again to review and discuss the retirement protection system,” he continued, adding that the government had commissioned a study into the MPF system, which would make recommendations going forward. The report is expected to be submitted in the middle of next year, Mr. Tsang said.

He added that as of April 2014, the MPF expense ratio was 1.69%, down from 2.1% in 2007.

As of February this year, the MPF scheme had about HK$517.4 billion (US$66.73 billion) in AUM, according to figures from the Secretary for Financial Services and the Treasury, Professor K C Chan.