The advocacy group argues that the MPF is hugely expensive to administer and regulate, and as the contributions accumulate, “it won’t be many more years before the annual fees and expenses on the funds are more than HK spends on old-age social security”.

Indian policy-makers have debated several aspects of the Hong Kong MPF system, so it is important to note its drawbacks as well. Logically, competition between fund managers ought to have kept expenses low and in check. The Hong Kong MPF is managed by well-known names such as — ING Pension Trust, HSBC, Fidelity, Prudential and Sunlife.

But Webb argues that competition is killed by the fact that the employers choose the fund managers not the contributing employees. Employees can change fund managers when they switch jobs, but they would incur exit loads or redemption charges. Interestingly, civil servants in Hong Kong are not subjected to the high overhead costs of MPFs, because their pension is paid out of taxes collected by the exchequer.

David Webb, who heads the group, is now lobbying to get the government to drop its proposal to increase ‘relevant income’ for calculating employee contributions to the MPF from $ 20,000 to $ 30,000. He has also called for an abolition the MPF itself on the grounds that long-term blockage of an employees funds in unfair, especially when he/she cannot touch the money even if the loss of a job is likely to lead to a default on mortgage payment. In these circumstances, high expenses and fund management fees begin to rankle even more.

... contd.