Council Meetings (Oral Question): Abolition of MPF Scheme (2016.02.03)

MR CHAN KIN-POR (in Cantonese): It is pointed out in the documents that each year 21% of the total contributions are voluntary, showing that many consider the MPF a good avenue for investment. Let us look at the fact that $21 out of $100 is voluntary, not mandatory, contribution. Indeed, over the 15-year period, after the administrative fees ― I have to make it clear so people will have a clear picture ― the MPF has recorded a return of 3.1% net of administrative fees, way higher than the 1.8% inflation rate in the same period. Also, compared to banks which only offer deposit rate at 0.1%, the MPF provides a much higher rate of return. Hence, do people really understand the performance of the MPF? They should not blindly follow the herd and make negative …

PRESIDENT (in Cantonese): Mr CHAN, please do not repeat the information.

MR CHAN KIN-POR (in Cantonese): Here comes the supplementary question I wish to raise. While the Secretary has said that the current expense ratio stands at 1.6%, the actual percentage should be less than 1.6%. Why? This is because the figure has not reflected any discount. I want to ask the Government if it will request service providers to provide the figure in real term, which I believe to be 1.3%. I hope the Government will do so as soon as possible so that the general public will learn of the many positive aspects of the MPF, which is not as undesirable as many have suggested.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I agree with Mr CHAN’s analysis that many members of the public make voluntary contributions to MPF schemes. Why do they do so? The reason is simple. They need to pay fees for buying funds on the market. Let us take a look at the fees of some MPF funds. Most of them charge 1% or even less, at a level similar to those of other funds on the market. And that is why some people make voluntary contributions to the MPF. The problem here is how to guide people to pay attention to the fee details and make wise choices. We must undertake work in this aspect. But to be honest, a lot of people do not care and do not understand. They complain simply because they have heard that the MPF is bad. Hence, in terms of government policies, we will push forward a capped DIS with the aim to clear up misunderstanding in this respect and guide the public to make more balanced investments. In this regard, we can only say we will devote more efforts to education and promotion.

Concerning the rate of return, it has been 3.1% recently, which is a true reflection of market volatility. For example, a year ago the MPF recorded an overall rate of return of 4.6%. Why was there such a huge drop? This is because a great deal of movement has been seen in Hong Kong equities over the past few months. Members of the public need to watch closely the market conditions and refrain from making short-term selling in violation of the goals of long-term investment plans.

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