After a multi-year build, Hong Kong’s pension system is about to launch its digital service platform. It will be operated by eMPF Platform, a wholly owned subsidiary of the Mandatory Provident Fund Schemes Authority, the system’s regulator.
Eric Lui, CEO and executive director of the new company, says its goal is to have 90 percent of the system’s 4.7 million members onboarded within five years following the platform’s full implementation. That is scheduled for the end of 2025.
“We are trying to embrace the use of big data, analytics and mobile technology to help the pensions industry,” he said, speaking at the recent Hong Kong Fintech Week.
Over time, Lui says MPFA will use the platform to analyze scheme and member data. “This is a platform, not a single system,” he said. “It will create synergies for other services and facilitate startups that can bring innovation to the system.”
For example, a member can retrieve their information, show it to a financial advisor, or connect it to a robo-advisor or other wealthtech provider.
One drawback to MPF funds is that they are cut off from a person’s overall wealth picture, incompatible with someone’s private investments or other financial profile. Digitalization should enable MPF funds to integrate into personal financial management apps, even if regulations require them to be run separately (that is, the money has to remain within the MPF system).
eMPF is not just a digitalization project, but a fundamental restructuring of how Hong Kong manages its pensions system.
The MPF scheme was introduced in 2000 with a commitment to allowing employers choice regarding their provider, and launched with 20 trustees to run the various investment funds. Each trustee runs its own administration, fragmenting the system, duplicating processes, and raising costs.
Although over the years the number of trustees has consolidated to 13, that is still a lot of siloed processing for a small population. Each trustee handles its own employee enrollment, monthly contributions, benefit withdrawals, and other day-to-day paperwork – and with most of it indeed paper-based.
The eMPF Platform is not only digitizing these processes, but it is consolidating the administration into a single platform, with one set of standards and processes.
Trustees such as Manulife, AIA, HSBC, and Bank Consortium Trust will still exist, serving the needs of 355,000 employers running about 10 million individual accounts, invested across 404 mutual funds. But for employees who sign up to eMPF, the back-office work will be conducted over the platform, while the trustees focus on investments.
The government is funding eMPF, and the company will operate as a utility.
All existing member accounts’ data will migrate to eMPF over the next two years. Then members or their employers must activate their account and receive an ‘eMPF ID’.
“This is similar to your [government] ID, it goes with you throughout your working life,” Lui said.
ID holders can then log into the platform to see all of their accounts and manage them across trustees.
The employer-led nature of MPF means people changing jobs usually get different MPF providers. There is a limited form of portability and scheme consolidation. But the manual nature of MPF admin has made it inconvenient for people to bother with managing their MPF accounts, until they reach retirement age and want to withdraw their benefits.
Lui says eMPF will be a ‘one-stop shop’ for scheme members. “They will have access to information in real time and can transfer funds across trustees. This should create room for further fee reductions,” he said.
The company’s goal is to see administrative fees fall by 30 percent after two years. “Over ten years we can deliver up to HK$40 billion ($5 billion) in total savings to members,” he said. Meanwhile, trustees will focus on product, marketing and customer service, rather than on admin, which should drive competition.