Towers Watson explains reasons for MPF education project

Consultancy Towers Watson has outlined its rationale for servicing Hong Kong citizens via its educational MPFexpress.com project, even though its core clients are institutional investors.

The firm, part of whose remit is to advise corporations on employee benefits, says a key driver behind the scheme was to examine how Hong Kong’s pension market was evolving.

Towers Watson launched the MPFexpress.com magazine and website last March to educate Hong Kong residents about how to get the most out of the MPF scheme.

The trigger for the project was the planned introduction of Employee Choice Arrangement (ECA), tentatively due to be introduced this November (see AsianInvestor magazine’s February 2012 issue).

ECA will allow employees to redeem their contributed sum on an annual basis and shift those assets to a provider of choice. It is partly being introduced to promote competition and to use market forces to reduce fees.

Responding to AsianInvestor enquiries as the fifth edition of MPFexpress.com hit the streets yesterday, the consultancy’s Asia-Pacific managing director Naomi Denning says she does not see this project as a major departure for the firm.

“The lines between institutional and individual investors are becoming increasingly blurred across the world, to the point that now we even refer to insti-viduals,” she says.

“In terms of what we are doing [with MPFexpress.com] it is different from what we’ve normally done. But our business focus is to help raise awareness of MPF and to provide tools and information to make it clearer.

“Once everything is developed, our intention is to work with corporate clients. Corporates will continue to receive questions from employees as ECA comes into force. So our aim, though this is still a work in development, is to help corporates to help individuals.”

But Denning points out that Towers Watson was conscious it did not want to exclude individuals from the process, rather treat it as a universal education project. “Our intention is to expose information for all individuals, even though our client base is primarily institutional,” she says.

Towers Watson also wanted to broaden its focus beyond the original voluntary pension market, which is regulated under the Occupational Retirement Schemes Ordinance (Orso), to the city’s developing defined contribution MPF system.

“Defined contribution schemes are growing and members are getting more choice and becoming more engaged and this is not unique to Hong Kong,” she says. “We are leveraging work we do in other markets channelled through our corporate clients.

“We see [MPFexpress.com] as an opportunity to leverage our expertise in defined contribution retirement planning. After all we do help with websites and build planning tools to help with retirement schemes.”

At the same time she says there is a philanthropic element to what Towers Watson is doing. “It is not just about getting money out of the market, but about how we can do something helpful and influence the industry to do things better,” she notes. “That’s what makes Towers Watson tick.”

The latest edition of MPFexpress.com focuses on why the city’s 2.5 million MPF members ought to consider consolidating their existing preserved accounts, of which there are an estimated four million in the MPF system from a working population of just under three million. Startlingly that has grown up in just 11 years, given that the MPF scheme was introduced in December 2000.

“Hopefully this will help people to look at how many accounts they have and where those are sitting and to think about a more efficient approach,” says Philip Tso, Towers Watson’s director of investment services based in Hong Kong.

Asked whether the MPF Authority might want to consider making account transfers automatic when employees move from one job to another to avoid a big build-up in preserved accounts, Tso replies: “I think that is a fair observation, but that is best left to the regulator to consider.”

Quizzed about the out-of-market risk MPF members would undergo as they consolidate accounts, Tso puts a typical transfer process at five working days from an institutional investor perspective.

“There is always a risk because existing providers have to sell the assets and they move on to the new providers,” he acknowledges. “But it depends on the type of funds people are investing in, especially in a volatile market. But we would still argue that it is worth members’ while.”

The edition outlines the steps members need to take to consolidate their preserved accounts. It also features an expanded three-page news section in which it identifies several MPF fund providers that have reduced fees. “This we see as a positive development,” adds Tso.

The latest issue of the quarterly magazine can be downloaded at www.mpfexpress.com for free.