Not unlike Hilary Swank in her iconic performance in Million Dollar Baby, Hong Kong’s MPF scheme continues to punch above its weight – but is HR clued-in to maximise the benefits for employees?
By Francis Chung, executive chairman, MPF Ratings
What if a company did not consider the best interests of their employees when they selected their MPF scheme? Did your organisation consider the best interest of employees when selected its MPF scheme? Are you ready to look after a $2 trillion baby?
The MPF system celebrated its 20th anniversary on 1 December with assets of $1 trillion and an average member account balance of $245,000. While MPF laboured for 20 years to reach its first trillion it will take less than 10 years to reach the next trillion dollar milestone – an accelerated trajectory with significant implications for which employers will need to plan today.
The Mandatory Provident Fund Schemes Ordinance is the principal legislation which governs MPF, and while voluminous in content, explicit in the legislation is that initial MPF contributions are made equally (for the most part) by employers and their employees. But the perception of partnership is anything but clear because while contributions are shared, choosing the MPF scheme is not. It’s the exclusive obligation of the employer.
When account balances are modest employees may not care, but with average MPF account balances set to grow exponentially, reaching an average of $500,000 in less than a decade, employees will doubtless examine their MPF more carefully, and it’s at that moment when employees may hold their employers accountable for their scheme choice.
By selecting an MPF scheme, employers may feel they’ve fulfilled a legislative obligation but given that employees’ own contributions are also held within the selected MPF scheme the question should be asked, “was the choice in the best interest of employees?”.
Without the initial and ongoing input of staff, a conversation around an unsatisfactory MPF scheme may make for an uncomfortable dialogue, especially when retirement nest eggs are at stake.
Employers who prioritise employee interests should see MPF as a partnership and if staff were not involved in the initial MPF scheme selection it’s not too late to involve them now.
Reviewing your current MPF scheme arrangements, and involving your staff, doesn’t obligate one to change providers, but it speaks to good governance and employee duty of care. Much has changed in the two decades since MPF’s inception meaning your current scheme may no longer be meeting the needs of your employees.
Competition has lowered fees, technology is now better, and services levels can vary, all of which may (or may not) make alternative MPF schemes better suited to your and your employees’ needs, but by collaboratively reviewing, one ensures that the most appropriate MPF scheme is in place while demonstrating best business practice and protecting the financial well-being of staff.
MPF today is more competitive than ever. MPF providers will do whatever they can to accommodate your needs. They have an incentive to provide better service, and better savings and investing tools and materials, so your and your employees’ journey to finding the most appropriate MPF scheme is not a lonely one.
Done well, the evaluation will improve knowledge and create better saving and investment habits, and in doing so will ensure a mutually successful savings, investing and retirement partnership between you and your staff today, for the next decade, and decades beyond.