TOGETHER, WE RE-THINK RETIREMENT
At Gain Miles, MPF is probably the most brought up topic in our everyday conversation. We are passionate about it not only because it is our core business, but also the System itself is critical for Hong Kong people.
2020 marks the 20th year of the MPF System in Hong Kong. There were good years and bad years, yet we learned a lot together with the industry.The Hong Kong public has their own opinion on MPF based on Gain Miles’s survey, yet the MPF System itself is also evolving. We believe that some fundamental changes to how we understand and expect from MPF and actions from various stakeholders are necessary in order to make MPF a success for Hong Kong.
This research, which presents you a comprehensive picture of the development of the MPF System, analysis of MPF investment performance, public opinion on MPF and retirement; is trying to find an answer and trigger discussion and exchange of views among the Hong Kong MPF market players.
The research covers:
1. Over the Years - Key milestones of the MPF system
2000 - 2020: Where do we stand today?
he MPF System was brought to life on 1 December 2000. It aims to serve as the second pillar in the multi-pillar pension system design suggested by the World Bank back in 1994.The second pillar should be “mandatory defined contribution plan with independent investment management”. MPF, the version of second pillar we have in Hong Kong, mandatory, privately managed and fully funded, is meant to provide stronger retirement protection to us.
So after 20 years, where are we standing today?
Mature and Polished
Over the years, the MPF market has been changing and being shaped by legislations, member needs, service providers and more. When compared to its first appearance, it is fair to say that the MPF market has matured and is polished.
Strong competition is observed in the market by the number of trustees and particularly the number of schemes. It was first launched with 51 schemes but now only 28 are up and standing. Consumers, which are MPF members of the Hong Kong public, are the ones ultimately benefited from market competition. Products, which are MPF schemes and constituent funds are more differentiated and priced competitively to stand in the market.
The size of total MPF assets in Hong Kong should draw our heads up, growing from HK$11.5 billion from 2001 to over HK$1 trillion. The growth stems from employee and employer contributions, and also a vital part which keeps things running – net-of- fee investment return. This number is more than one third of Hong Kong’s GDP, which pose a strong stance for all stakeholders, not only those making
a business out of it, but also the MPF members who are the actual owners of these assets, should pay close attention to MPF.
Fees of MPF have remained a key concern among the public and under media spotlight. In 2004, the Code on disclosure for MPF Investment Funds was issued by the MPFA. It requires MPF providers to provide more transparent information to
the public so that they would be able to compare and make better informed MPF investment decisions.
A Fund Expense Ratio (FER) was also developed to provide a comparable measure of the total level of expenses incurred in investing through a fund. FER has become a key indicator in MPF fees. It was followed later in 2007 by the introduction of a Fee Comparative Platform, allowing MPF members to compare fees among funds easily.
“Low Fee Funds” were defined bythe MPFA in 2012, as funds with Fund Expense Ratio (FER) equal to or lower than 1.3%. FER is observed to be on a downward trend, thanks to the effort of the MPFA as well as service providers responding to the market.