Information Centre

I am writing to express my disagreement with your editorial on 3 October 2022, titled “As losses mount, time to shake up MPF”, which contains misleading information. The writer’s suggestion about the MPF business model reflects a lack of understanding of the MPF System. 

There are five different MPF fund types: Equity Funds, Mixed Assets Funds, Bond Funds, Guaranteed Funds and Money Market Funds. Each fund type has unique investment objectives and risk levels. MPF scheme members should select an investment portfolio according to their personal investment goals and risk appetite.

MPF scheme members’ fund choices directly affect the return on their MPF investment.  According to MPFA statistics, as at the end of June 2022, equities accounted for over 64% of the aggregate Net Asset Value of MPF funds. Since the MPF System has significant exposure to equities, mainly through scheme members’ investments in equity funds and mixed assets funds, the overall return of the MPF System tends to move with global market fluctuations. 

In response to the writer’s remark, “If employees had been allowed to save contributions in cash instead of securities, they may well have been able to stay protected from the crisis”, I must point out that the existing MPF Conservative Fund, which is a type of Money Market Fund, serves this purpose as a “parking fund”. This type of fund is generally classified as a low-risk investment product, as it invests in Hong Kong-dollar assets – either short-term bank deposits or short-term bonds. MPF scheme members who are close to retirement or who may wish to avoid market risks for the short term may consider investing their MPF in this type of fund. However, it should be noted that Money Market Fund may not be suitable for long-term investment for its return may not beat inflation.

With regard to the writer’s view about reducing MPF management fees, I would like to emphasize that the MPFA understands the public’s concern about MPF fees and driving fees down has always been one of our top priorities. Over the years, the MPFA has initiated various reforms to facilitate market competition and to enhance transparency in order to drive fee reductions, including the Employee Choice Arrangement (ECA) (more commonly referred to as “semi-portability”) and the MPF Fund Platform which provide comprehensive information on MPF funds for MPF scheme members to compare their fees and performance.

As a result of the joint efforts of the MPFA and the industry, the fund expense ratio (FER), which is an objective measurement of MPF fee levels, has dropped by 35% from 2.1% in 2007 to the current 1.37%. Our latest measure requires MPF trustees to provide an annual governance report in respect of their MPF schemes, disclosing how MPF trustees have strived to provide better value for their MPF scheme members through a regular assessment of the investment performance and fee levels of their MPF schemes.

Moreover, the eMPF Platform, which the MPFA is currently developing at full steam, will standardize, streamline and automate the MPF scheme administration processes. This will improve the efficiency of the MPF System and create further room for reducing administration fees. It is estimated that the eMPF Platform will achieve cumulative administration cost savings of $30 billion to $40 billion over a 10-year period, equivalent to 41% to 55% of the original administration fees over the same period.

Lastly, regarding the writer’s concern about MPF scheme members who are reaching the age of 65, I would like to remind them that instead of withdrawing their MPF in a lump sum, depending on their personal needs, they may choose to withdraw their MPF by instalments or retain their MPF benefits in their accounts for continued investment. 

Cheng Yan-chee

Managing Director

MPFA