What Safety Nets Guard Your MPF Money?

What are the three MPF safety nets?

In April 2011, AXA Hong Kong’s Lee Ping-hei outlined MPF’s triple safety net: the MPF Compensation Fund, the trust structure, and investment restrictions. The fund was seeded with HK$600 million from the government in 1999 plus a 0.03% levy on each scheme’s net assets, covering losses on mandatory and voluntary accrued benefits with no compensation cap. The trust structure ring-fences assets, so even a trustee’s bankruptcy cannot touch members’ money.

What investment restrictions apply?

Investment managers must be licensed and adequately capitalised; no single issuer may exceed 10% of a fund’s net asset value; at least 30% of a constituent fund must be Hong Kong-dollar assets to curb currency risk; managers may not borrow securities for constituent funds. By March 2010 the compensation fund held about HK$1.39 billion and no member had ever claimed.

How were MPF intermediaries to be supervised?

The 2011 plan was “one industry, four regulators”: the MPFA setting the intermediary code while the HKMA, SFC and Insurance Authority enforced it, with strict MPFA approval for trustees on financial soundness.