Follow-up Question on the Employee Choice Arrangement under the Mandatory Provident Fund Schemes
Mr. President,
I understand the public concern about the level of the administration fees of Mandatory Provident Fund Schemes, but I think it can only be reduced if the operating cost of the MPF scheme can be reduced. That can be achieved by simplifying and automating the MPF procedures and the compliance requirements. The Government’s reply to this question states that if members choose more low-fee funds, the level of the administrative fee would definitely decrease. However, almost every service provider has already provided low-fee funds in their products. Has the government done research on why low fee funds are not popular among the MPF scheme members? Is it because the members are more concerned about the net return? Hong Kong citizens’ wisdom should not be underestimated. Why didn’t they choose low-fee funds? Please answer.
Reply by the Secretary for Financial Services and the Treasury:
This is a very good question. In the past, we had done research on how to encourage fund companies to promote some low-fee products. Low fees do not mean low returns. The cost of Index Fund is relatively low because these funds are passive managed and its returns follow the market performance. There are many Index Funds in the market, such as Tracker Fund. The cost of these funds is lower than 1%. What is the sales information of these funds? This is what I need to understand. We will conduct researches and provide more public education on this aspect.