Meeting Hong Kong’s retirement needs
BCT Group, a leading provider of MPF/ORSO solutions and best-in-class asset servicing for global investment funds and pensions, is winner of Asia Asset Management’s (AAM) 2021 Best of the Best awards for Best MPF Scheme Provider (20 years). The firm was recognised for its achievements in providing outstanding service platforms and all-round investment choices to members of the Mandatory Provident Fund (MPF) – the largest retirement savings system in Hong Kong.
Ka Shi Lau, managing director and chief executive officer of BCT Group, is also honoured with AAM’s Lifetime Achievement Award – MPF for her contribution to the city’s pension industry.
AAM: Please talk about the development of BCT product strategy.
Lau: BCT always strives to offer more investment choices and flexibility in a way that diversifies investment risk and generates better long-term investment returns for members. The company maintains close dialogue with regulators, fund managers, employers, members and the public in order to keep abreast of market trends and retirement needs of Hongkongers. We also regularly review and enhance our platforms to ensure that our products address and anticipate members’ needs.
Having witnessed that the majority of Hongkongers have limited knowledge of retirement investing and how to select the appropriate funds for their needs, BCT iPortfolio was launched in 2020 to help members better understand their risk profile and make informed investment decisions.
AAM: What asset classes do you think should be included in the MPF system?
Lau: MPF funds are mainly plain vanilla products, which are easy to understand. Despite there being over 440 MPF funds in the market, the existing line-up gives members limited exposure to certain asset classes.
We believe that assets like infrastructure and high-yield bonds should be incorporated into the MPF platform as they can generate steady income flows for downside protection.
The MPFA’s removal of limits on A-shares last year was a good start, and we hope they will further relax investment restrictions on MPF funds and include new asset classes to give members more investment choices that can serve to diversify investment risks whilst giving fund managers greater flexibility in making allocations. REITs, in particular, are a suitable investment choice for retirement funds as they tend to offer a steady investment yield.
Expanding the permissible asset classes and promoting tax deductible voluntary contributions could encourage members to contribute more into their MPF savings pool and generate better returns. A wider range of asset classes could accelerate the development of MPF and strengthen Hong Kong’s role as an Asian investment fund hub.
We are also placing increasing focus on environmental, social and governance (ESG) factors to ensure that our fund managers are integrating these factors into their investment decision-making processes. Saving for retirement is a long-term investment and investing sustainably is important.
AAM: What is your view on the development of decumulation retirement products?
Lau: The ageing population is a pressing issue and to address longevity risk, we expect demand for post-retirement solutions to increase. We are seeing more providers launching new solutions and BCT is no exception. Retirees require a stable income stream and this year we plan to launch a new pre- and post-retirement product within the regulatory framework, featuring a mix of asset classes that will offer a balanced portfolio and regular income upon retirement. This would help make their savings last throughout retirement.
AAM: What changes will eMPF bring to the traditional MPF industry?
Lau: As a common e-platform for handling scheme administration of the MPF system, the eMPF will standardise, streamline, automate processes and improve administrative efficiency. Obviously, it will reduce a lot of paper-based transactions, thus reducing impact on the environment.
Targeted to deliver a simpler and user-friendly interface, the eMPF should also enhance user experience and empower members to invest and retire in a smarter and more sustainable way. “e” is the DNA of the system and will become the new normal.
The eMPF is not just designed for millions of MPF members, but also employers, trustees and the MPFA. So, if done well, it should bring about changes to the MPF ecosystem, push forward the sustainable development of the retirement planning industry and play a key role in Hong Kong’s transition towards becoming a smart city.
My key concern is the digital take-up of employers as many small- and medium-sized enterprises are less tech-savvy and less willing to adapt to change. For that reason, our aim is to foster behavioural change of members and employers in better preparing them for digital transformation. In recent years, we have increased our investment in technology and have launched an end-to-end eJourney to help clients go electronic, from MPF enrolment, making contributions via e-payment, fund transfers through to changing personal particulars.