The Mandatory Provident Fund Schemes (Amendment) Ordinance 2016 (Commencement) Notice was gazetted today to specify the implementation of Mandatory Provident Fund Default Investment Strategy from April 1, 2017.
The notice, a piece of subsidiary legislation, will be tabled at the Legislative Council on October 19 for negative vetting.
Default Investment Strategy consists of two constituent funds, namely the Core Accumulation Fund with 60% relatively higher risk assets and 40% relatively lower risk assets, and the Age 65 Plus Fund with 20% relatively higher risk assets and 80% relatively lower risk assets.
The de-risking mechanism will start reducing exposure to higher risk assets gradually, by transferring investments from the Core Accumulation Fund to the Age 65 Plus Fund annually when investment strategy member reaches the age of 50.
The fee control mechanism consists of two caps, namely a 0.75% fee cap and a 0.2% annual out-of-pocket expenses cap, both calculated as a percentage of the constituent fund’s net asset value.
Secretary for Financial Services & the Treasury, Prof KC Chan said the fee-controlled Default Investment Strategy directly addresses the concerns of high fees and difficulty in making investment choices in the Mandatory Provident Fund.
He expected the fee control mechanism of the strategy will promote competition among service providers and bring about further fee reduction across the board.
“In fact, we have already seen reduction in the management fees of 45 constituent funds and consolidation of eight MPF schemes since May this year," he added.
