Ten Years of MPF: Less a Celebration, More a Call for Reform

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

In December 2010 Hong Kong’s Mandatory Provident Fund turned ten. Rather than a moment to celebrate, it looks like a moment to take stock: the system has amassed nearly US$45 billion in assets with 2.45 million members and compliance above 90%, yet criticism over high fees, inadequate coverage and too little choice keeps mounting — and even MPFA chairwoman Anna Wu concedes it is not seen as providing adequate retirement protection.

What has MPF achieved in ten years?

Scale and participation — but returns come after hefty fees. Since its 2000 launch, the entirely privately-run system has gathered nearly US$45 billion, enrolled 2.45 million people and weathered major market shocks without a major scandal. Annualised returns on contributions stood at 5.1% after fees to 30 September 2010, and the industry expects total assets to triple in the next decade.

Why the chorus of complaints?

Because the very traits behind its success are blocking its progress. In late November 2010 Wu admitted the scheme was neither adequate nor universal, and blasted providers for cutting fees too slowly since inception. In September the government postponed member choice — originally due by April 2011 — to first sort out regulation and training for 20,000-plus intermediaries, with no new date announced.

Where next?

Calls range from amending and adjusting the system to scrapping it or folding it into a government-funded pension. As the original piece observed, the attributes that made MPF a success against its original objectives — private operation, employer-chosen schemes — are now restricting its next step. Compare MPF funds’ fees and returns at MPF fund comparison.