Only one-sixth of Hong Kong's 300,000 businesses have signed up with a pension provider, even though the launch of the Mandatory Provident Fund is less than five months away. The remainder are waiting for a better deal. And the media, the providers complain, are partly to blame because of their obsessive reporting on the levels of fees.

As the trustees battle for market share, fees and incentives have become the ultimate weapons. CMG Asia is the latest to drop practically all fees, including trustee, custody, administration and management fees for the first 13 months upon joining. Even now, the company is non-committal about whether more fees will be waived.

Meanwhile, trustees are pessimistic about the number of employers who will sign up early. They are also concerned about how they will process applications if the bulk of the 250,000 businesses who have yet to sign up decide to make a last-minute rush to beat the 1 December deadline.

Nicholas Crouch, vice-president of Manulife, believes that out of the 21 MPF providers only "two or three" will have the resources to deal with the high volume of applications. He says Manulife will process applications around the clock if necessary.

Many employers will face the last-minute problems of introducing a payroll system that will have to meet MPF requirements on compliance, reporting and administration. Installing MPF-compliant software may be a simple task, but, if left until the last minute, companies may be fighting for the attention of the same technician if problems arise.

The word on the streets

Educating Hong Kong's three million employees about the MPF is going to be another problem. According to a survey by Schroders Investment Management in January, 98% of the 500 respondents did not know what a growth fund was and 96% could not define a money market fund. If a service provider is to give education seminars to just 120,000 workers in the next five months, six days a week, it will have to explain to 1,000 workers each day about pension funds investment. But the chances are that most employers will not register with a provider until the deadline presses closer.

The Mandatory Provident Fund Authority (MPFA) has sent 180 university students out onto the street as 'ambassadors' to explain the MPF scheme to 60,000 shop owners in a nine-day (29 June to 7 July) awareness campaign. Four managers have also been sent out to help. But critics say the regulator is doing too little, too late.

While pension providers agree it is largely the providers' responsibility to educate the public about fund investment and the importance of signing up early, some believe it is time for the MPFA to talk tough.

"The providers can give all the encouraging messages but some employers probably think that they won't get caught even if they miss the deadline," says Manullife's Crouch. "I think the message will have to get through to them that the MPFA is serious about compliance. And the MPFA will have to wield that big stick very soon, otherwise it's going to be a very busy period for everyone concerned."

Softly, softly

Ernest Lee, MPFA executive director of members protection, is reluctant to even discuss the 'big stick'. "At this stage, I do not want to talk about penalty. As I have been stressing, we're trying to emphasize as much as possible the rights and obligations of employers and employees under the law." He says the MPFA plans to send out 50 inspectors to 'inspect' non-complying companies.

From 1 December 2000, the MPF scheme requires employers and employees to contribute 5% each for the employees' retirement. The penalties for non-complying employers are six months' jail and a fine of HK$100,000 ($12,828).

Meanwhile, the price war between providers is unlikely to cease as most are saying they're simply reacting to other providers' price cuts.