HK pension eyes Australia performance model after eMPF launch
Hong Kong’s public pension regulator looks to draw lessons from Australia’s superannuation system on investment performance monitoring after launching a digital platform that paves the way for future reforms.
This includes potentially expanding permissible investments and adopting a practical “value for money” framework to track financial returns for the city’s 4.75 million retirement scheme members.
“Australia is pioneering with its performance monitoring mechanism. A lot of jurisdictions are having a keen interest in that,” said Eric Cheng, executive director (policy) at Mandatory Provident Fund Schemes Authority (MPFA), Hong Kong’s public pension regulator.
“We have watched this space. We have interest,” he told the Hong Kong Investment Funds Association’s annual conference on June 24.
“It’s very important to ensure that the performance…responds to the expectations of scheme members,” he added.
Cheng’s remarks preceded MPFA’s official launch of the eMPF platform on June 26 after three years of development. The digital system streamlines administrative processes through a one-stop online portal for members, employers, trustees and fund managers.
“Now we have the fintech platform (eMPF)…and that certainly reduces the hurdle for introducing other new measures and paves the way for future reforms,” he said.
As of end-March, MPF’s total assets stood at HK$1.18 trillion ($151 billion).
Since its inception in 2000, the scheme’s overall annualised net return was 2.6%, outpacing the 1.8% annualised inflation rate over the same period, according to MPFA’s latest data.
MPFA expects eMPF to reduce scheme administration fees for members by around 30% in the first two years.
Cumulative financial savings from eMPF are estimated at HK$30 billion to HK$40 billion over 10 years after its full operation in 2025.
Besides fee cuts, Cheng noted the regulator actively engages international peers to align MPF with global best practices.
For instance, he highlighted Australia's value for money framework, which the UK also plans to adopt.
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In Australia, trustees have a legal duty to ensure value for money, safeguarding members' best financial interests.
The regulator applies a performance test that evaluates investment outcomes against benchmarks. Value is measured by net benefit, factoring contributions and earnings, minus costs, fees, taxes, and applicable premiums.
MPFA is also proactively studying broadening permissible investments and facilitating the industry to develop investment products tailored to members' needs, Cheng said.
Research platform MPF Ratings estimated the pension scheme’s total assets could hit a record HK$1.23 trillion by mid-2024, fuelled by robust US equities performance and rising contributions in the first half of this year.