Legislative Council - Mandatory Provident Fund Schemes (Amendment) Bill 2015
14 March 2016
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In view of the importance of the MPFS (Amendment) Bill 2015 to scheme members, I am writing to express Consumer Council's concern over the opt-out arrangement under the Default Investment Strategy (DIS) proposal.
Specifically the Council is highly concerned about the proposed transitional arrangement for the DIS. The Council's stance over the proposal was clearly stated in our previous submission to MPFA in response to the consultation paper "Providing Better Investment Solutions for MPF Members" on introducing a Core Fund. Attached please find the Council's submission dated on 30 September 2014 for your reference.
Knowing that the proposal will be debated at the coming LegCo Council Meeting, the Council would like to take this opportunity to emphasize again our reservation about the opt-out arrangement and that investment risk could be an issue for switching default scheme members' accrued benefits from conservative funds to relatively high equities portion involving higher risks without their explicit consent, in particular if those scheme members for some reasons do not make prompt action within the specified reply period.
The Council is of the view that it is not to the benefit of consumers to make the transition as an opt-out arrangement, this could incur potential loss to concerned scheme members. For better protection it is more desirable to allow scheme members stay with the same type of fund unless they have indicated change of their investment choice. This opt-in approach will avoid possible disputes and legal proceedings arising from the transfer of accrued benefits (especially if they incur financial loss) to the DIS without express investment instructions from scheme members.
In any case, the DIS is a new arrangement, the Council opines that the proposed 42-day reply period may not be sufficient for the scheme members to seek for advice and to indicate their option if they choose to do so, thus, MPFA may consider extending the reply period when the change takes effect. In this regard, public education before the implementation would be crucial to generate awareness and actions, and to minimise subsequent disputes as a result. MPF contribution is hard earned money of many scheme members and they should be their own boss to make decision.
The Council hopes that Members could take the above into consideration before finalising the transitional arrangement, given it is an important decision affecting many scheme members in Hong Kong.