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Article | MPFexpress

How MPF Trustees Protect Members' Rights

By Elaine Hwang and William Chow | April 28, 2023

Understand how the MPF Authority takes active measures to regulate and monitor the MPF trustees to help protect members’ rights. This article in English and Chinese is available for download.

The MPF trustee plays a critical role in the MPF system, overseeing essential tasks such as system administration and holding the scheme assets. We examine this in more detail and share how our MPF benefits are protected by the MPF trustees, especially in light of the recent failure of some overseas financial institutions.

Approved trustee must comply with operational and financial requirements

To become a trustee of an MPF scheme, the company must be approved by the Mandatory Provident Fund Schemes Authority (“MPFA“) and adhere to a set of principles. The Trustees must act in the interest of scheme members and not in their own interest. They must operate prudently in accordance with requirements set out in the MPF ordinance. In addition, the trustee needs to make use of all relevant knowledge and skill to manage and maintain the plan and ensure the assets of the scheme are invested in different investments to minimize the risk of losses. The trustee is also responsible for supervising and controlling the appointed service providers. The MPFA will also examine the financial soundness and capital adequacy of the trustee, the suitability of each controller and the competency of the board of directors and chief executive officer. Finally, the trustee needs to have adequate insurance, as well as robust governance and internal control measures.

MPFA proactively monitors trustees

All current trustees were approved before the MPF system launched in 2000. However, the MPFA employs a proactive supervisory approach by way of both on-site inspections and off-site monitoring, depending on the risk profile of each MPF trustee.

Off-site inspections are made in accordance with the MPF Schemes Ordinance issued by the MPFA. The trustee must submit returns, audited financial statements and reports to the MPFA on a monthly, quarterly and annual basis. Returns must be accompanied by audit reports to provide an independent view of the financial position and the operations of the scheme. By reviewing these documents, the MPFA monitors whether the trustee complies with statutory requirements and relevant governing rules. In addition, the MPFA also conducts regular on-site inspections to review specific areas of their operations. If any non-compliance issues are identified during the inspection, the trustee must rectify them within an agreed time limit.

Under the MPF Schemes Ordinance, MPF trustees are required to take out adequate professional indemnity insurance to provide compensation as a result of misfeasance or illegal conduct committed by MPF trustees. If the insurance is unable to provide adequate compensation, scheme members can seek compensation from the MPFA’s Compensation Fund. The Compensation fund’s current reserve is over $1 billion. No claims have been made since the establishment of the Compensation Fund.

Recent bank failures have not affected MPF members’ benefits

Recently, there have been a small number of failures within the overseas banking sector. According to the MPFA, these recent events have had no direct impact on members’ accumulated benefits, nor did they pose any risks to members’ MPF investments. The MPFA has stringent regulations on the operation and financial status of MPF trustees, and regularly conducts proactive supervision to ensure MPF trustees comply with their legal requirements. With such strict supervision in place, members’ benefits are fully protected.

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How MPF Trustees Protect Members' Rights PDF .8 MB

Senior Director & Business Development Lead, Greater China

Head of Retirement, Hong Kong & Macau

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