Hong Kong pension scheme going digital will save members US$5 billion in fees over 10 years
- Hong Kong’s lawmakers last month approved legislation for the city to establish an online centralised platform called eMPF
- The digital platform will cut down the use of paper and save costs for the scheme’s 4.5 million members
The switch to a digital platform for Hong Kong’s compulsory retirement scheme will save the 4.5 million members as much as HK$40 billion (US$5.14 billion) over 10 years, according to the head of the pension regulator.
The project, which will cost taxpayers HK$4.9 billion, is expected to be completed by the end of next year.
“The eMPF platform will make Hong Kong one of the first markets worldwide to have a single digital platform to manage all scheme administration procedures of the privately managed pension scheme,” Ayesha Macpherson Lau, chairwoman of the Mandatory Provident Fund Authority, said in an interview.
The legislation has an important provision, which requires all trustees to directly pass on any costs saved from using the eMPF platform to scheme members, Lau said, adding that members will save up to 55 per cent in administration fees.
According to the provision, trustees cannot charge their members administration fees that are higher than what they will pay to use the eMPF platform.
The switch to a fully digital MPF platform will be another milestone for the city following the launch of eight virtual banks and four virtual insurers over the past two years.
The MPF was launched in December 2000 to provide retirement protection to the working population. Since its inception, total assets under management have reached more than HK$1.2 trillion (US$128 billion).
Despite being an international financial centre, Hong Kong has been surprisingly traditional regarding the pension scheme. Many small and medium-sized enterprises and employees still use paper forms and cheques to pay contributions to their MPF accounts or switch fund choices.
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On average, two-thirds of the 30 million MPF transactions annually involve paper forms, according to the MPFA. After the eMPF is implemented, all MPF providers will have to use the digital platform but individual members will still have the option of using the eMPF or paper forms.
“The eMPF is going to cut down the use of paper, while also making it much easier for all members to manage their MPF online,” Lau said.
Older MFP members seem to be reluctant to change. “I am over 60 and I feel more secure and aware of my MPF if I can receive my MPF statement by post,” said David Chan, a white-collar worker.
The 13 MPF providers will have a two-year period to transfer their 27 MPF schemes to the platform, allowing them to do it in phases.
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“It is important to improve the MPF system to enhance the retirement protection for the Hong Kong public because of the ageing population,” she said.
In 2038, 31 per cent of the city’s population will be over the age of 65, compared with 18 per cent in 2019.
Lau is also concerned about women’s retirement protection. At the end of last year, the 2.24 million female MPF members had HK$521 billion of MPF assets, while the 2.3 million male members had HK$618 billion.
On average, each female member had HK$232,000 in their MPF account, less than a male member’s HK$269,000.
“The lower average amount of pension assets of female members compared with male members may reflect the fact that they need to spend more time to take care of the family duties,” she said.
