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Following is a question by the Hon Sin Chung-kai and a reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (January 11):
Questions:
Regarding the fees and charges of the Mandatory Provident Fund (MPF), will the Government inform this Council whether:
(a) it will consider making public, in the Code on Disclosure for MPF Investment Funds, the fees and charges of funds of similar nature managed by trustees of MPF funds, so as to facilitate comparison by MPF scheme members;
(b) it has compared the cost structures of MPF funds, including the costs of management, administration and other services, with the relevant aspects of non-MPF funds; if it has, of the comparison results; and
(c) it will take measures to encourage trustees of MPF funds to scale down their management costs so as to lower the fees and charges; if it will, of the details; if not, the reasons for that?
Reply:
Madam President,
(a) In June 2004, the Mandatory Provident Fund Schemes Authority (MPFA) issued the Code on Disclosure for MPF Investment Funds to improve the disclosure of fees and charges of MPF funds offered.
The Code has set out a number of initiatives for implementation in phases. By the end of 2005, approved trustees have already been required to disclose fees and charges in a consistent manner by the use of a standardised fee table. With better disclosure, we hope that MPF scheme members can make more informed investment decisions.
In tandem with the implementation of these disclosure initiatives, the MPFA will also explore the development of a comparative platform for a common facility that will allow MPF scheme members to compare the fees and charges of MPF funds.
(b) The MPFA has made a preliminary comparison of the cost structures of these funds and the result indicates that they are generally similar. The MPFA notes that in both cases there are usually annual or monthly fees payable to the operator(s) of the fund (the manager and/or trustee) and other service providers such as investment managers. In addition, there is a range of smaller fees/costs such as custodian, auditor, establishment and legal fees. All funds also incur transaction costs associated with investment acquisition and disposal. Many non-MPF funds also charge members an initial up-front fee but generally such fee is waived or not charged by MPF funds at present.
(c) The MPF System in Hong Kong is a privately managed retirement protection system. The approach adopted is principally to rely on market forces to set the price (which equates with the fees and charges) of MPF funds. The implementation of the MPFA's Code on Disclosure for MPF Investment Funds seeks to improve transparency of fees and charges so as to allow market forces to work more efficiently. The Government and the MPFA will continue to review the disclosure requirements, in the light of the market development, to enable MPF scheme members to have better knowledge about the fees and charges when they make their investment decisions.
Ends/Wednesday, January 11, 2006
Issued at HKT 11:56
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