The default investment strategy to be implemented under a draft bill on the city’s pension fund system may expose participants to risks in the stock market without their consent, market players said.
According to the draft bill, pension scheme participants who fail to specify the investment strategy for their funds will automatically have their portfolios transferred to hybrid funds investing in both stocks and bonds, unless they opt out of the default investment strategy, the Hong Kong Economic Journal reports.
The proportion of investment in the two instruments will be determined in accordance with the age of the scheme participants: those aged above 50 will have 20 percent of their investment parked in stocks while those aged 50 or below at 60 percent.
Such a default investment strategy will expose the investors to risks in the stock market and lead to immediate losses should the market slump once the transfer is made, market observers said.
The Hong Kong Federation of Insurers urged the authority to revise the draft bill to change the setting from an opt-out to an opt-in arrangement, but the proposal was rejected.
The federation called on fund participants to make their own decision at least on whether to transfer their accumulated interests once they receive notice regarding the new arrangement.
[Chinese version 中文版]
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