MR CHAN KIN-POR (in Cantonese): President, after listening to Mr KWONG Chun-yu, I come to realize why Hong Kong is reduced to this sorrowful state. That is because many people are spreading specious, biased and far-fetched information in the Council instead of telling the truth. Despite the President’s reminders, Mr KWONG kept saying the same thing over and over and, worse still, he alleged the President of taunting him. How outrageous! President, I just wish to give a brief response and will return to the subject as soon as possible. Being the representative of the insurance sector, I have to respond to the specious arguments. I will keep my response short and immediately return to the subject once you remind me to do so.
The whole issue is simple enough. I do not want to speak at length, nor do I wish to give the President a hard time. I will just give a few figures. Mr KWONG has just talked a bunch of nonsense, but we should note that, first of all, the administration fees of certain Hang Seng Index Tracking Funds range from 0.6% to 0.8%, as compared to the average administration fee of 1.44% for the Mandatory Provident Fund (“MPF”) schemes. Employees are free to choose their own funds. While they may opt for a fund charging over 3% for administration fee, they can also pick well-performed funds charging an administration fee of 0.6% to 0.8%. Secondly, the Default Investment Strategy funds, with the administration fee capped at 0.9%, are now available. More importantly, thirdly, as I said in the motion debate on MPF in 2019, MPF gave an average return of 4.8%. That was the rate after fees. Mr KWONG Chun-yu, please gives us a product that yields a return of 4.8%!
Mr KWONG Chun-yu should take a good look at these figures. He could have thrown insults if MPF had failed to give this level of return; but now he should not ignore the truth and raise his voice to talk nonsense. The sad thing is that Hong Kong people buy this trick and give these people the biggest share of votes. They have talked members of the public into believing that MPF is riddled with problems. To me, MPF is also far from perfect, but I think we should let members of the public know why there are such problems. When Mr KWONG spoke on the offsetting problem, he did not say a word about its background. In the old days, the Government wanted to convince employers to endorse the MPF system, which would at least give employees some sort of protection. It therefore promised employers an offsetting arrangement. However, the Government is working hard to solve this problem.
PRESIDENT (in Cantonese): Mr CHAN Kin-por, please return to the subject of this debate.
MR CHAN KIN-POR (in Cantonese): No problem, President. I speak in support of the Second Reading of the Mandatory Provident Fund Schemes (Amendment) Bill 2019 (“the Bill”). The Bill seeks to provide a legal basis for the introduction of the eMPF Platform by, among others, empowering the Mandatory Provident Fund Schemes Authority (“MPFA”) to establish a wholly owned subsidiary and operate the eMPF Platform, and requiring trustees to pay an annual registration fee (“ARF”) to MPFA. It should be noted that the Bill, which was introduced last year, originally proposed that an ARF of an amount equivalent to 0.03% of the net asset value with respect to the registered schemes should be charged with effect from 1 January 2020. Yet, owing to “black violence” and the pandemic outbreak, people at one time worried that the Bill might not be able to get passed by the end of this legislative term. Fortunately, the Bill was tabled to the Council at the last minute. I urge Members not to stall the passage of this Bill as it concerns all employees in Hong Kong.
The purpose of setting up the eMPF Platform is to centralize MPF scheme administration under a one-stop electronic platform and promote paperless MPF transactions to create room for the reduction of MPF management fees. Given its automated processing capability with one set of common standards, this electronic platform can handle registration, enrolment, contribution, transfer and withdrawal of benefits, as well as record maintenance, in a centralized manner. Both employers and employees will then be able to issue instructions through this platform.
The insurance sector strongly supports the setting up of the eMPF Platform, which will not only provide employers with efficient and convenient services but will also lower the administration expenses for MPF. In fact, MPF is often criticized for its excessively high fees. One of the reasons, as I just said, is that MPF scheme members did not opt for schemes charging low administration fees. Another major reason is that MPF trustees are required under the law to deploy substantial manpower for handling cheques and other administration duties, including the collection and allocation of contributions, recovery of outstanding contributions, transfer of MPF benefits, fund switching and benefits withdrawal. According to the statistics, there are currently about 4.4 million scheme members with about 10 million accounts in 28 MPF schemes. Among the around 30 million MPF administration transactions per year, 65% are paper-based. Coupled with the fact that different trustees adopt different standards and practices, we can imagine how high the administration costs would be. So, instead of focusing solely on MPF charges, we should take into account the services provided by the trustees. It is my hope that members of the public will look at MPF rationally so that they will not be cheated by the shallow nitpickers. When each trustee has its own standards and practices, the costs will naturally be high. In this technology age, it is indeed backward and environmentally unfriendly to deploy substantial manpower in handling MPF transactions.
According to the latest information provided by MPFA, the average administration fee ratio stands at 1.44%, down 30% from 2007. Personally, I have put my MPF contributions into index funds since the launch of MPF owing to their good performance and low administration fees. An administration fee of 0.6% is even lower than the international standard. Scheme members should understand that they actually have a choice. Therefore, I think it is better for the Council to educate the public about wealth management than wasting time on insults. Hurling insults is no solution to problems but will bring in votes. Many people are thus making a beeline for it. I do not want to see the public being cheated by the many liars in the Council anymore. I hope people can understand that.
As stated by the Government, the eMPF Platform is introduced to facilitate the streamlining of scheme administration and the reduction of compliance costs. However, the actual rate of fee reduction will depend on the tender result of platform development and the digital take-up rate. In the opinion of the trade, it will be most effective to lower the fund expense ratio by slashing the administration expenses. A successful implementation of the eMPF Platform is thus believed to be likely to bring down the administration fees significantly. Yet, the success of this project hinges on the actual responses. The Government has made it clear that some members of the public may not know how to use the electronic platform. Therefore, at the initial stage, physical service centres will be set up to provide assistance to the platform users while paper-based transactions will inevitably continue. Upon the launch of the eMPF Platform, the authorities should hence do its best to promote the platform or provide incentives for users to use it. The authorities should also adopt a simple and user-friendly design for the electronic platform to encourage members of the public to switch to the digital platform. In case some small and medium enterprises or elderly employers continue to use cheques for MPF transactions and refuse to switch to the electronic platform, the administration expenses cannot be reduced across-the-board. Consequently, the administration fees are unlikely to go down. The trade does not want to see this from happening as our trade members have worked hard to lower their administration expenses.
The trade has also noted that certain administration processes may not be able to go digital and will continue to be handled manually. MPFA is now collaborating with the trade to standardize such processes as far as possible. However, the trade considers this practice as leaving a loose end for tomorrow, failing to give a holistic solution. The best practice will be to hand over all administration duties, including those which cannot be digitalized, to the eMPF Platform and a central administration centre. MPFA should not leave out some of the administration work for service providers to handle as that cannot truly achieve the objectives of cost saving, streamlining and standardization. In addition, if possible, all administration processes should go digital in future to tie the loose end.
In order to fund the development of the eMPF Platform, the Legislative Council has previously approved two funding applications totalling to almost $4 billion for MPFA to develop the platform and support its initial operation. Therefore, everything is ready for the development of the eMPF Platform. Once the Bill is passed, MPFA can take its next step to expeditiously introduce the electronic platform, thereby lowering the MPF administration fees for Hong Kong people to save money in everyone’s pocket. I think this is why we need to have this Bill and I implore Members to support it. Thank you, President.