HONG KONG - As much as HK$126bn in pension fund cash will be up for grabs when employees are given the right to freely choose their Mandatory Provident Fund (MPF) investment companies.
Frederick Ma, secretary for financial services and the treasury, announced the government’s plan to reform the MPF scheme at a Legislative Council meeting in mid-July.
Employees in future may be able to choose their own MPF company instead of the one assigned by their employer under current rules. The administration estimates that approximately $126bn, or 60%, of the current
MPF asset of over $210bn, will be released into the MPF market. This already includes reserved accounts and the self-employed, which take up about 30% or $63bn.
The move comes after a report by the Consumer Council said MPF savers could end up paying a substantial portion of their total retirement benefits to fund managers, banks and insurance companies in fees.
Most Mandatory Provident Fund schemes charge annual fees of between 1% and 4%.
“I think a lot of consumers are not very aware of the existence of the fund expenses and how they are calculated,” said Larry Kwok Lam-kwong, chairman of the council’s community relations committee.
The administration said it did not rule out as a future possibility regulation of the MPF fee through enacting legislation or setting a price ceiling.
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