27 October 2016
The cost and return of the MPF is a hot topic given a rapidly aging population. Photo:
The cost and return of the MPF is a hot topic given a rapidly aging population. Photo:

How MPF costs could be further reduced

Hong Kong is facing a serious aging problem and retirement planning has become a hot topic in recent years.

More local residents realize that they have to plan for retirement as soon as possible.

To better equip their members, the Institute of Financial Planners of Hong Kong launched a Qualified Retirement Adviser program last year.

The cost and return of the Mandatory Provident Fund (MPF), Hong Kong’s compulsory saving scheme, is another popular topic when it comes to retirement planning.

While the cost ratio of the MPF has fallen to 1.57 percent from 2.1 percent in 2007, further cost reduction remains a big challenge, said Cynthia Hui, executive director of the Mandatory Provident Fund Schemes Authority.

The merger between Henderson and Janus can provide some insight.

London-based asset manager Henderson Group agreed to buy US fund operator Janus Capital Group.

At present, 80 percent of Janus’s clients are in the US and 70 percent of Henderson’s clients are in Europe.

The merger could increase cross-selling and is expected to boost sales revenue by 2 to 3 percent without extra costs.

MPF operators in Hong Kong can also consider a similar strategy to reduce the overhead and boost the cost-effectiveness of their products.

Meanwhile, after British Prime Minister Theresa May said the Brexit talks will start by the end of March, the pound sterling weakened sharply on the country’s uncertain economic prospects, hitting a 31-year low.

But a cheaper pound sterling is good for the UK economy in the long run as it can stimulate exports as well as attract capital inflows.

As happened in Japanese equities when the yen was in a downtrend, there is no need to be overly bearish on UK equities.

This article appeared in the Hong Kong Economic Journal on Oct. 7

Translation by Julie Zhu

[Chinese version 中文版]

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Founder and Managing Director of Pegasus Fund Managers Ltd.

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