LCQ3: Mandatory Provident Fund schemes

On March 22, 2023, Mr. Christopher Hui, Secretary for Financial Services and the Treasury, was asked a number of questions during a session of the Legislative Council in connection with the Mandatory Provident Fund Scheme (MPFS). These questions primarily pertain to the estimated „poor“ performance of MPFs in the past year and seek to inquire about
(a) the number of account withdrawals in the past ten years along with an adequate breakdown by the number of years MPF accounts were held;
(b) a possible review of the MFPS in view of the performance; and
(c) a possible expansion of investment options to include, for instance“ investment funds with „capital preservations“ or funds „operating on a „no profit, no fee“ basis“.
Omitting the answer to the first question noted above (a), the following statements were made by Mr. Hui:
With respect to a possible review of the Mandatory Provident Fund Scheme, the Secretary stated that the current MPFS was subject to frequent reviews since its onset. In fact, several revisions have been made in view of changing socio-economic factors, a changing work environment, and changing market conditions. Specifically, the Hong Kong government and the Mandatory Provident Fund Scheme Authority (MPFA) have introduced a tax exemption framework for contributions, have expanded the investment possibilities to allow investments in Mainland A-shares and sovereign bonds, have „introduced the fee-controlled Default Investment Strategy (DIS)“, to name a few. The government and the MPFA will continue to work together and conduct reviews particularly with a view of “
increasing investment choices and returns, lowering fees and improving adequacy and members‘ protection of the MPF System“.
As far as a possible expansion of investment options is concerned, Mr. Hui notes that the current MPFS is well equipped with over 400 constituent funds from which MPF members can choose. This includes a wide range of funds, from funds investing in Hang Seng Index Tracking ETFs, to funds that guarantee the principal of investment. Nonetheless, the government has directed the Hong Kong Monetary Authority (HKMA) and the MPFA to examine alternative investment fund options with low management fees and stable returns. Additionally, the government plans to dedicate a „certain proportion of the future issuances of Government institutional green bonds and infrastructure bonds for priority investment by MPF funds“. Finally, Mr. Hui states that the government will stay open-minded to expand eligible investments of MPFs to accommodate for a changing market environment and changing interests of MPF scheme members.