The great MPF reform debate: should the new government start over?

This article is a rewrite of a report from August 2012.

Semi-portability launched in November 2012 with providers and intermediaries rubbing their hands, media specials and surveys rolling in — as feverish as MPF’s own debut. But the MPF reform debate deserved to go deeper than semi-portability.

What was structurally wrong with MPF?

It was a compromise between a colonial administration and a SAR government unwilling to fund universal retirement protection. The low-paid workers who needed it most could not live on 30-odd years of accumulation, yet lost 5% of income monthly; the well-off resented the dent in disposable income; bosses saw employer contributions as added cost. With no stakeholder happy, opposition was inevitable.

Why were fees so high?

Layers upon layers, each charging. A provider set up a scheme, the scheme held constituent funds, the funds held approved pooled investment funds — fees at every level. Over a thousand SFC-authorised funds existed, broader in markets and risk spread than MPF constituent funds — why not let workers buy those directly? The admin savings would have been substantial.

What was wrong with employers choosing schemes?

Two banking groups took half the market. Employers picked the scheme with workers voiceless, naturally favouring financial institutions they did business with. Twelve years on, results disappointed; Hong Kong needed comprehensive retirement and social protection. A new government wanting to act had to review seriously.