【明報專訊】THE MANDATORY PROVIDENT FUND SCHEMES AUTHORITY (MPFA) has suggested that all MPF schemes be required to include as the default investment strategy a "core fund" option, whose management fee must be capped at 0.75% a year. This is the first time a major reform for regulating the MPF system by legislation has been proposed in fifteen years. However, whether the reform will allay the criticism that the MPF system is "unfair" and "unjust" depends on whether citizens set great store by and support it.
High management fees and low returns are what MPF schemes are mainly criticised for. Management fees eat away at employees' contributions, and it is quite common for some MPF schemes to record negative rates of return after management fees are deducted. As of the end of last year, MPF assets totalled $560 billion. Last year, as the average charge was 1.65%, trustees, fund managers and other stakeholders together took more than $9 billion. The huge sum is employees' hard-earned money. However, last year the overall MPF rate of return was only 1.52%, even lower than the average charge. In other words, the investment returns from all the MPF accounts, which number around 2.7 million, were less than $9 billion last year. It can thus be seen how unfairly most returns on MPF investments are distributed.
The management fees of the core fund suggested will be capped by law at 0.75%. The rate is reasonable compared with those of other schemes, which easily top 1%. However, in other places there are funds whose management fees are as low as 0.2% to 0.3%. Compared with them, the management fees of the core fund will still be high. Secretary for Financial Services and the Treasury Ceajer Chan believes 0.75% is just the initial level of the cap, which can be lowered in the future. Furthermore, the MPFA suggests the investment risks of the core fund be revised downwards as the participant grows old. This is an appropriate arrangement for employees who lack experience in investment and are not good at managing their finances. All in all, the core fund can, to a limited extent, redress some problems for which the MPF system is criticised.
The MPF system is criticised as "unfair" and unjust". Though they are forced to make MPF contributions, some citizens are too averse to the system to pay their schemes any attention. In any case, the MPF system has been in place for more than 15 years and, by virtue of it, many employees have accumulated some wealth. To allow themselves greater security in retirement, they should change their mindsets, pay attention to their schemes and, in view of the plan the authorities have made, make appropriate investment arrangements so as to maximise their MPF wealth. Measures like the "MPF semi-portability", the core fund or the "MPF full-portability" to be introduced are not too complicated to understand. With professionals' help, employees should be able to make changes and choices advantageous to themselves. It is of first importance that employees stop ignoring their MPF schemes. "Wealth ignores those who ignore it." This is a common aphorism useful to employees who should reevaluate the MPF system.