Review of the Implementation of Governance Principles by MPF Trustees

The Mandatory Provident Fund Schemes Authority (MPFA) has issued a circular addressed at trustees of mandatory provident fund schemes (MPFs) to present the findings from a recent review of trustees‘ governance principles and practices.
Specifically, in 2018, the MPFA issued a general set of principles that stipulate core governance obligations of MPF trustees in terms of Board composition and oversight, monitoring of MPF valuations, fees, and performance, or practicing due diligence with respect to fund management and MPF scheme members (investors). In 2022, the MPFA conducted a self-assessment practice among trustees to assess their level of compliance with the principles. This circular now presents these findings which are briefly outlined below:
– Trustees – in large – appeared to be conducting regular reviews of Board compositions and their performance;
– Trustees – in large – regularly assessed fund performance and outcome for investors;
– Trustees sometimes made use of electronic communications to get or stay in touch with investors.
However, there were a few issues that arose on basis of the data provided by trustees:
1. There was an unusual high number of non-executive directors (INEDs) that have served the Board of Directors. Indeed, more than 1/3 of all trustees indicated that they have INEDs that are part of the Board since more than 10 years.
2. There are still low levels of on-line MPF accounts and customer communication (notification), e.g. such as the electronic sending of account statements.
3. The current average management fee of 1.33% appears to be too high.
As a consequence, the Mandatory Provident Fund Schemes Authority requires trustees to take the following action:
– by Q2 2023, trustees must conduct an analysis to identify room for the reduction of fees and present a 5-year strategic plan on how they plan to reduce their fees;
– by Q1 2023, trustees must develop and present plans to promote the use of „e-services and e-statements“;
– by Q2 2023, trustees must „review and enhance their support services“ to facilitate the use of „e-services and e-statements“ (e.g. via infographics, short videos, etc.);
– by Q3 2023, trustees must develop policies for the performance of regular reviews of the tenures of INEDs and for the evaluation of the „true independence“ of such directors; and
– by Q4 2023, trustees must have succession plans in place for „long-serving“ non-executive directors.