Hong Kong’s HK$516.2 billion (US$66.6 billion) Mandatory Provident Fund Schemes Authority released a consultation paper this week on the introduction of a uniform, low-fee, target-date default option for employees in Hong Kong.
In the paper, Hong Kong’s government and the MPFA made the case for establishing guidelines for default options that could help the portion of the territory’s more than 2.5 million MPF participants who don’t make their own selections from among the approved funds achieve better, more consistent outcomes.
In a news release, MPFA Chairwoman Anna Wu expressed the hope that concrete proposals on “core” default funds would be ready for presentation to the government by late 2014 or early 2015. The consultation paper said the new default funds should be in place by 2016.
As it opened a three-month period of comment and consultation through Sept. 30, the MPFA called for a default option that automatically trims members’ exposure to riskier assets such as equities as they approach age 65.
And in a system where the level of fees charged by money managers and other providers has continued to draw criticism, the consultation paper said the default option must offer “good value,” setting a target of capping fees at 75 basis points or less of fund assets.
Darren McShane, executive director, regulation and policy, said in a telephone interview Thursday that the retirement fund is looking to move from a system in which members who don’t make their own choices have been funneled to a variety of funds yielding “totally different outcomes” to one in which all can get “broadly the same outcome.”
In a retirement system where “mandatory” is often an unwelcome word, Mr. McShane expressed the hope that the consultation paper will promote “sensible, informed” deliberations on reforms.