A survey of the Mandatory Provident Fund (MPF) reveals that 65 percent of respondents were unaware they will become eligible to transfer their contributions to the fund to other MPF providers.
The new scheme – MPF Employee Choice Arrangement – will commence in November and results from complaints that many companies swallowed up contributions with heavy service charges. The transfer option will be available to subscribers once a year.
The survey, conducted by the Public Opinion Programme at the University of Hong Kong, interviewed 1,005 MPF contributors aged 18 to 65 by telephone between July 6 and 20 this year.
MPF comprises two parts, contributions from the employee and from the employer. According to the MPF system, employee and employer are required to contribute 5 percent of an employee’s income to the fund. Under the original system, employees had no choice in which company his MPF contributions were invested.
Among the 65 percent who who was unaware of content of the new arrangements, 36 percent said they didn’t know which part of the fund could be transferred. About 30 percent of respondents wrongly believed that the entire MPF investment package or the part contributed by the employers could be transferred at their option.
The survey showed that Hong Kong people still have doubts about MPF and feel a lack of motivation to manage their MPF accounts even in view of the new options available in November.
Though the new arrangement gives MPF members the choice to transfer their contribution to the fund, half of respondents said they wouldn’t bother. Only 11 percent of the respondents said they would make transfers.
"Inconvenience" was cited as the top reason for not transferring funds by 29 percent of respondents. Another 22 percent of interviewees said there is no reason to change, being the second most important reason.
In ranking the confidence in the MPF system, 84 percent of the respondents gave scores under 5 on a scale of 0 to 10. The average scores given to the system was 3.7.
The average per member asset has grown to HK$160,000 over the past decade after the current MPF system came into to effect in December, 2000.
Gloria Siu, chief executive of Gain Miles MPF Consultants Limited, a MPF consulting company in Hong Kong, described the money as a "sizable amount of cash" that has potential to be much greater, if it was properly and actively managed. Siu also encouraged employees to seize the opportunity in the new arrangements and invest.
"Fees and charges" were chosen as the most important criteria when choosing a MPF scheme, followed by "own investment and risk taking" and "past performance of trustee", the survey revealed.
The survey also showed that around 70 percent of respondents expect to have control over buy and sell timing and pricing of stock trades and funds.
Mandatory Provident Fund Schemes Authority, in response, said it would try its best to improve public’s recognition of the new arrangement before it takes effect.