HK's MPFA to offer RFP with new scheme admin plan
A new centralised electronic customer service platform for Hong Kong’s Mandatory Provident Fund (MPF) system is expected to issue a request for proposal next month, as the scheme regulator rolls out a promotional campaign.
Details of the RFP are still under wraps but AsianInvestor understands that the Mandatory Provident Fund Schemes Authority (MPFA) is hiring a team of senior managers to oversee the new platform, known as eMPF.
On Wednesday (November 27), the MPFA will be showcasing* the new system at Hong Kong’s Conference and Exhibition Centre in Wanchai.
The eMPF service platform aims to cover the entire MPF system, with 10 million member accounts, 300,000 employers and 14 trustees. The MPF system has assets under management of around HK$900 billion ($121 billion) in 441 funds.
The reason for setting up this new electronic system is to improve administrative efficiency across the entirety of the MPF system, to increase competition and potentially drive down costs.
The MPFA said that every year, scheme administrators and trustees receive over 1,000 complaints. The regulator also estimates there are 100,000 paper transactions every day within the current system.
“EMPF is going to be a very significant issue,” Stewart Aldcroft, managing director of Cititrust, told AsianInvestor, echoing the thoughts of the MPFA’s deputy chairwoman and managing director, Alice Law.
“It will tear down entry barriers for smaller service providers in the market,” she said.
The target for completion of the scheme rollout is 2022 and there is expected to be a five year lead-in period, meaning that all MPF schemes would need to be transferred from their current MPF service provider into the central eMPF service.
The Legislative Council Panel on Financial Affairs is due to discuss a progress report on the eMPF scheme on December 2, after which it is expected a date will be set for the RFP to be issued.
MORE COMPETITION
For the existing large players in the MPF market – the likes of HSBC, AIA and Manulife – the question is to what extent they will be willing to allow a major source of revenue (scheme administration) to be taken away from them.
AsianInvestor reached out to HSBC, AIA, Manulife, as well as consultants Mercer and Willis Towers Watson, but none were able to comment by press time.
From the MPFA’s point of view, the motivation for the new system is to bring scheme administration into a standardised electronic format and make it more efficient.
“There are cases where employers are unable to make MPF contributions or submit remittance statements to their trustees on time, resulting in a surcharge and even prosecution,” John Wan, general manager of the eMPF Project, in a presentation on Tuesday, said. “Calculating contributions manually is not reliable and is error-prone, and submitting remittance statement or cheques by post may result in delivery delays.”
Once the RFP is issued, enrolled tenderers will have to submit their proposal before the deadline, which is likely to be well into the first quarter of 2020, according to MPFA.
“The consultants will want to pitch for it and the big existing MPF providers may also presumably want to try and corner this market," said Aldcroft.
MPFA's objective is to give members a system they can easily interact with, by allowing 24/7 payments and consolidating multiple accounts. Aldcroft said the selection process "will need to reflect the ability of the providers to provide a very automated system,”
He observed that the full ramifications of eMPF are not well understood by most MPF product providers.
“Some do realise that once EMPF is in place ... MPF members [will no longer] be compulsorily required to join the plans their employers select for them. Employees will have much greater choice,” he said. "It will allow many more providers to come to the party, offering approved pooled investment funds (APIFs) that can be linked to MPF. Vanguard and Blackrock has already done this within the default investment strategy, and others will follow.”
* Cheng Yan Chee, executive director at MPFA, will present on ‘eMPF Platform – A Revolutionary Change of the MPF Eco-System’. This presentation will be in Cantonese.