If scheme members have not specified a fund choice on their enrolment forms, their trustees will invest their contributions automatically according to the Default Investment Strategy (DIS). Members can also choose to invest their MPF benefits either according to DIS or in individual funds under DIS.
Features of DIS
DIS is a ready-made investment solution, made up of two mixed assets funds, namely the Core Accumulation Fund (CAF) and the Age 65 Plus Fund (A65F).
DIS has three key features:
- automatic reduction of investment risk as members approach retirement age (automatic de-risking)
- fee caps
- global investment for risk diversification
If a scheme member chooses CAF and A65F as a standalone fund choice (rather than as part of DIS), the member will still benefit from fee caps and globally diversified investment. However, automatic de-risking will not apply. For more information, please contact the relevant trustees.
DIS uses two mixed assets funds. The two funds invest globally in different asset classes in different proportions in order to reduce investment risk.
- Core Accumulation Fund (CAF) – About 60% of assets of the fund is invested in higher risk assets (mainly global equities), and the rest in lower risk assets (mainly global bonds).
- Age 65 Plus Fund (A65F) – About 20% of assets of the fund is invested in higher risk assets (mainly global equities), and the rest in lower risk assets (mainly global bonds).
If MPF benefits are invested according to DIS, trustees will automatically and gradually reduce the exposure to investment risk as a scheme member approaches retirement age (as illustrated below):
Below Age 50
From Age 50 to 64
Above Age 64
All contributions and transfer-in benefits in the member’s account are invested in CAF.
The MPF benefits invested in CAF are in the member’s account gradually reduced while those invested in A65F are gradually increased every year, until the member reaches the age of 64.
All the MPF benefits in the member’s account are invested in A65F.
How does it work?
Once scheme members reach the age of 50, their trustee will automatically reduce their investments in CAF and increase their investments in A65F progressively. This will be done once a year according to the percentages set out in the table below.
The automatic de-risking is carried out on a member’s birthday*, from his/her 50th to 64th birthday.
Note: The proportions of investments in these two funds may vary due to changes in the fund prices after the trustee makes the adjustment. The percentages of the two funds are as those set out in the above table when the automatic de-risking is made but the percentages do not remain exactly the same throughout the year.
For more information about the risks involved in investing in these two funds, please refer to the MPF Scheme Brochure (also known as “offering document”).
CAF and A65F are mixed assets funds, neither capital nor returns are guaranteed. Given the volatilities that can occur in investment markets, especially in the short term, CAF and A65F are subject to pricing changes, both up or down.
DIS uses two mixed assets funds: CAF and A65F. The fees and expenses of the two funds are capped as follows:
By contrast, scheme members who are closer to retirement typically have a relatively lower risk tolerance level, because they have less time to ride out fluctuations in the investment cycle and make up for any sharp drops in the value of their investments. Therefore, they should consider investment options that bring less investment risk.