MPF system can be updated to better meet members’ needs before and after retirement

The Mandatory Provident Fund system has been implemented for two decades. Over this period we have seen enhancements introduced on various fronts, including the e-MPF initiative.

While these have been extremely helpful, the Hong Kong Investment Funds Association believes structural enhancements should be considered to ensure the MPF system remains fit for purpose and best serves the long-term interests of scheme members, particularly those aged over 65. These enhancements should focus on better alignment between the regulations guiding the phase in which scheme members save for retirement (accumulation) and the phase where members require support for their post-retirement lifestyles (decumulation).

We suggest relaxing investment restrictions to allow MPF funds to invest in a wider range of asset classes, including but not limited to high yield, infrastructure, real assets, private equity and commodities. It would provide the flexibility to identify additional return drivers for MPF investors and offer benefits of diversification. It would also follow other developed market pensions systems and help MPF investors achieve their retirement objectives.

A separate set of guidelines should be introduced for decumulation to better align with the needs of retirees in Hong Kong. The guidelines could facilitate the establishment of MPF constituent funds only accessible to scheme members over 65.

The introduction of the eMPF provides an excellent opportunity for structural enhancement. If there were a set of decumulation funds available on the eMPF platform, a higher proportion of retirees could remain in the MPF system to benefit from funds catered to their needs, lower pricing and simpler fund switching.

Retirees should be offered more support to help them make informed decisions. There should be a wholesale review of the MPF investment framework to support the needs of both scheme members saving for retirement and those in retirement. This would require dialogue between regulators and bureaus so an integrated approach can be adopted to support the development of the retirement market in Hong Kong. The HKIFA pensions subcommittee would be pleased to lend full support.

Charles Brooke, chair, and Philip Tso, vice chair, HKIFA pensions subcommittee