What are the most urgent reforms to MPF?

Hong KongÆs government should make three aspects of pension reform its priority, according to participants at yesterdayÆs seminar on the future of the territoryÆs retirement system, organised by AsianInvestor.

These are to focus on investor education, to support voluntary contributions via tax incentives, and to introduce member choice of master trust schemes.

AsianInvestor polled the delegates of the seminar, which included representatives from employers, master trusts (fund managers, banks, insurance companies), trustees, social service organisations, regulatory bodies and benefit consultants. We received 78 individual responses û which may not be a huge number but represents the views of most of the territoryÆs experts on matters MPF-related.

A detailed look at MPF reform will appear in the April edition of the magazine.

Despite the obvious achievements of MPF since its inauguration in December 2000, industry experts remain divided as to its efficacy, with nearly half our respondents saying the system has not worked in the best interests of its members, and a strong majority saying that default options and lump-sum payments need to change.

They agreed strongly that employees should be able to choose their master trust, that mandatory contribution limits be raised from the current HK$20,000/month, and that the government should support voluntary contributions.

Perhaps the most challenging aspect to improving the retirement system involves investor education, a topic that repeatedly surfaced during the seminar. We asked delegates to rate both the regulator, the Mandatory Provident Fund Schemes Authority (MPFA), and master-trust providers in general, in terms of their communication and education, as good, adequate or poor. For both, the votes for ægoodÆ were fewest. A lot of work needs to be done.

The full survey results are:

1. Has the MPF system worked in the best interests of its members since inception in 2000?
Yes: 38
No: 32
No reply: 8

2. Should employees be able to choose their master trust?
Yes: 57
No: 11
No reply: 10

3. Have recent MPF fee reductions stimulated interest in investing?
Yes: 28
No: 45
No reply: 5

4. Have recent MPF fee reductions improved confidence in the system?
Yes: 43
No: 30
No reply: 5

5. Should the mandatory contribution limit be raised from HK$20,000 per month?
Yes: 58
No: 16
No reply: 4

6. Should the government support voluntary contributions through tax concessions?
Yes: 66
No: 4
No reply: 8

7. Is MPFÆs lump-sum payment adequate?
Yes: 10
No: 61
No reply: 7

8. Should capital-preserved funds remain the default option for MPF members? [Note: this is not in MPFA legislation but is common practice for many schemes.]
Yes: 15
No: 53
No reply: 10

9. How would you judge MPF investment returns since inception?
Poor: 5
Adequate: 45
Good: 18
Excellent: 7
No reply: 3

10. How do you rate the MPFA in terms of communication and education?
Poor: 27
Adequate: 31
Good: 15
No reply: 5

11. How do you rate master-trust providers in terms of communication and education?
Poor: 22
Adequate: 41
Good: 8
No reply: 7

12. Is MPF an appropriate platform for government-sponsored schemes for healthcare and insurance?
Yes: 49
No: 17
No reply: 12

13. What should be the governmentÆs priority for MPF reform? [Note: delegates could choose up to three.]
Investor education: 37
Member choice of master trust: 29
Voluntary contributions: 29
Fee compression: 26
Reforming payouts: 24
Transparency: 22
Investment choice: 17
Default to capital-preserved funds: 7