Consumer awareness and understanding of Mandatory Provident Fund (MPF) schemes, three years into their implementation, is still at a low level across the board.
This could seriously affect, for over two millions of the working population in Hong Kong, their choice and investment decision of a service that is statutorily mandated to join.
The Consumer Council, in a study on MPF information disclosure, has put forward a package of recommendations to redress the problem. The report was released today (November 14) in its latest issue of CHOICE, for the information of all concerned.
In the report, the Council stressed the importance of clear information disclosure and transparency to facilitate consumers in the comparison of MPF schemes, and to arrive at informed decisions. This will, in turn, enhance competition amongst MPF service providers in service quality and in price.
The recommendations aim to address a number of key issues identified through in-depth study, telephone survey and focus group discussions with participants drawn from different educational levels as well as Human Resources practitioners involved in MPF-related administrative work.
First and foremost, the Consumer Council is calling for standardization of information disclosure amongst MPF service providers, to improve the presentation format, contents and clarity of MPF documents, notably, the Fee Schedule, Member Benefit Statement and Fund Fact Sheet.
In the study, for instance, no less than about 100 different fee terms were identified in the 44 MPF schemes under review. Consumer understanding of the fees and comparison of the total cost was very difficult due to such factors as inconsistent terminologies, varied presentation formats, complicated pricing structure and different charging basis.
In general, the study found great divergence in the contents and presentation formats adopted by MPF service providers, as well as frequent use of technical jargons, inconsistent risk assessment standard and performance evaluation basis, etc.
Because of the new and complicated nature of MPF, the current disclosure regime, as revealed in the study, has further reduced the interest of MPF members in the subject.
The problem of low awareness and understanding was not confined to consumers of any particular educational level but across the board. As reflected in the survey, some Human Resource practitioners, though with higher investment proficiency and declared level of understanding of MPF documents than ordinary scheme members, were not completely knowledgeable about MPF.
The Consumer Council believes that the introduction of standardization in disclosure is a step in the right direction and will go a long way to redressing the problem.
In addition, the Council further suggests formulating a minimum standard of information disclosure as it was found that the extent of information disclosed varied very significantly amongst the different service providers.
For instance, in the case of Fund Fact sheet, nearly half of the samples reviewed failed to provide such vital information as major holdings, risk profile and fund size.
The study clearly indicates that more and better customer service support as well as consumer education is needed for the general public and in particular the less educated.
There have been suggestions raised by some service providers that improved information disclosure will entail extra costs which consumers will have to bear ultimately.
In the Council study, the views of consumers were mixed: few were willing to pay a reasonable amount but most opposed it as being unjustifiable on the grounds that service providers owe clients a duty to provide sufficient information about their accounts.
The Council is of the view that the industry will have to explain why incremental charges are necessary in the standardization of information disclosure to improve the quality of service to MPF members.