Assets take a $68.4b hit for the year

The authority’s data also showed that total assets comprised HK$851 billion, or 77 percent of net contributions, and HK$258 billion of net investment returns.

Though the net internal rate of return for the financial year ending in March stood at a negative 5.9 percent, the reading was narrowed down from negative 8.2 percent for the previous period.

Also, 2.9 million MPF accounts had made investments according to the default investment strategy or in the constituent funds of the DIS, up from 2.7 million from one year ago.

Total assets involved in DIS also increased by 5 percent to HK$89.44 billion, accounting for 8.1 percent of the total net asset value of the MPF system.

For the past financial year, the MPFA inspected 929 employers and issued 346,700 payment notices about MPF default contributions, with a total of HK$145 million of defaulted contributions successfully claimed back for 96,600 employees.

Meanwhile, the average fund expense ratio was 1.33 percent, 37 percent lower than 2.1 percent in 2007, when this ratio was first introduced.

As another way to reduce costs, the e-MPF platform will start receiving data on the MPF accounts, and see the transfer of all accounts complete in 2025.

MPFA chairwoman Lau also disclosed that the authority has been invited by global institutions including Organisation for Economic Co-operation and Development to share the development of the e-MPF platform project at their meetings.

Mandatory Provident Fund Schemes Authority chairwoman Ayesha Macpherson Lau said she and her team are working hard on four major goals, including improving investment returns, lowering fees, maintaining contributions, and encouraging the tax-deductible voluntary contributions since she started her second term in March.

“The final objective is to help MPF scheme members to increase their savings,” said Lau in an interview with Sing Tao Daily, The Standard’s sister newspaper.

And Lau thinks the ongoing e-MPF project offers a good chance to promote the four goals she mentioned. The online platform, which is expected to start operating in 2025, is designed to reduce the administration fees for MPF members.

For her first term starting in 2021, Lau had set four objectives, including improving returns, trimming charges, enhancing user experience, and the removal of public misconceptions about MPF, which might take years to achieve.

After two years, Lau said though these time-consuming goals have not been achieved, they are on track, and she will pay more effort to make progress.

Lau’s first term saw a surge in workload to recover contribution defaults by employers, as a lot of enterprises collapsed during the pandemic. The MPFA issued about 350,000 payment notices in the financial year ending in March, 35 percent higher than the average pre-pandemic level.

But MPFA’s duty to stand with the public is always there, said Lau, and the authority will take action to investigate defaults in contributions and salaries, instead of waiting for reports on contribution defaults from fund trustees every month.

For her new term, Lau said the MPFA would continue to focus on improving investment return.

And she believes the e-MPF platform will help trustees to concentrate more on fund returns and attract more service providers into the market.

The MPFA will keep reviewing investment scopes and explore the possibility of higher investment flexibility to introduce more retirement protection products.

In terms of plans to allocate part of green bonds and infrastructure bonds to be issued by Hong Kong, Lau said the MPFA is still working with the Monetary Authority on it.

On lower fees, Lau reiterated that the introduction of e-MPF will reduce administration costs by up to HK$40 billion within 10 years, and the charges under the default investment strategy will decrease from 0.95 percent to 0.85 percent.

However, Lau wants more. Besides the e-MPF platform, Lau said the authority is requiring trustees to review other charges and asked them to hand in a five-year plan at the beginning of this year.

On maintaining contributions, Lau said a review of statutory minimum and maximum income levels, which stand at HK$7,100 and HK$30,000 for those paid monthly, will be one of the major tasks in the coming two years and will start soon.

Lau expects the e-MPF platform to encourage employees to make more voluntary contributions.

As for tax-deductible contributions, the SAR plans to raise the tax-deductible limit of voluntary contributions per year by double for employees aged 65 and above.

The current tax-deductible limit per year is capped at HK$60,000 for both tax-deductible voluntary contributions and qualifying deferred annuity policy premiums. The MPFA is proposing the individual caps be set at HK$60,000 for TVC contributions and QDAP premiums.