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MPFA to enhance regulation of default funds
The Management Board of the Mandatory Provident Fund Schemes Authority (MPFA) today endorsed the direction of enhancing regulation of default funds of Mandatory Provident Fund (MPF) schemes to become the “core”, “easy choice” solution for scheme members.
The MPFA is of the view that such “core funds” will be able to simplify scheme members’ investment decision making.
The Management Board also endorsed that to ensure the “core funds” represent good value for members, their design should incorporate a fee control mechanism.
The MPF System by design provides scheme members with the opportunity to make investment choices. This is not an easy decision for many and some do not have the time or the knowledge to choose among the numerous funds.
At present, employees who have not chosen any funds will have their contributions invested in the default funds of the relevant MPF schemes. The type of default funds of each MPF scheme varies. As a result, the investment outcome of the default arrangements may also be very different.
Mrs Diana Chan, MPFA Managing Director, said, “The MPFA is determined to help scheme members simplify their investment decision by standardizing the default fund arrangement. With the ‘core funds’ in place, scheme members will not be required to make a choice if they do not want to because they are too busy or find the task too daunting. Those who do not make an investment choice will have their contributions automatically invested in a strategy that has been designed as offering the best-fit average long-term investment solution. Meanwhile, all scheme members may also choose to invest in these ‘core funds’ and the existing funds will continue to be available.”
“When many scheme members find the ‘core funds’ an attractive choice and invest in them, these funds will then achieve economies of scale, thereby making the entire MPF System more cost effective,” she said.
The Management Board agreed to obtain preliminary views from key stakeholders to further develop the proposal with a view to conducting a public consultation in the first half of 2014.
- Ends -
1 November 2013
The MPFA is of the view that such “core funds” will be able to simplify scheme members’ investment decision making.
The Management Board also endorsed that to ensure the “core funds” represent good value for members, their design should incorporate a fee control mechanism.
The MPF System by design provides scheme members with the opportunity to make investment choices. This is not an easy decision for many and some do not have the time or the knowledge to choose among the numerous funds.
At present, employees who have not chosen any funds will have their contributions invested in the default funds of the relevant MPF schemes. The type of default funds of each MPF scheme varies. As a result, the investment outcome of the default arrangements may also be very different.
Mrs Diana Chan, MPFA Managing Director, said, “The MPFA is determined to help scheme members simplify their investment decision by standardizing the default fund arrangement. With the ‘core funds’ in place, scheme members will not be required to make a choice if they do not want to because they are too busy or find the task too daunting. Those who do not make an investment choice will have their contributions automatically invested in a strategy that has been designed as offering the best-fit average long-term investment solution. Meanwhile, all scheme members may also choose to invest in these ‘core funds’ and the existing funds will continue to be available.”
“When many scheme members find the ‘core funds’ an attractive choice and invest in them, these funds will then achieve economies of scale, thereby making the entire MPF System more cost effective,” she said.
The Management Board agreed to obtain preliminary views from key stakeholders to further develop the proposal with a view to conducting a public consultation in the first half of 2014.
- Ends -
1 November 2013
