I. What is Default Investment Strategy (“DIS”)?
The DIS is a default investment arrangement as stipulated in
accordance with the Mandatory Provident Fund Schemes Ordinance, MPF members who
do not make their own choice of MPF funds, their accrued benefits, future
contributions and accrued benefits transferred from another MPF scheme will be
invested through the DIS. MPF members can also choose to invest through the
DIS.
The DIS is not a fund - it is a strategy that
uses two constituent funds, namely the Core Accumulation Fund and the Age 65
Plus Fund (collectively the “DIS Funds”, each as “DIS Constituent Fund”) to
automatically reduce the risk exposure as the member approaches retirement age.
The DIS funds will invest in a globally diversified manner and invest in
different assets (e.g. equities, bonds, money market instruments, etc.). The
DIS funds are subject to fee and expense caps as imposed by the legislation.
The DIS is required by law to be in every MPF
scheme and is substantially similar in all MPF schemes.
II. What are its features?
A. Automatic De-risking
The DIS will manage investment risk exposure by
automatically reducing risk for scheme members as they get older.
The DIS will use two constituent funds (“CFs”)
called the Core Accumulation Fund (“CAF”) and the Age 65 Plus Fund (“A65F”).
The CAF will hold around 60% assets in higher risk assets, such as global
equities, and 40% in lower risk assets, such as global bonds. The A65F will
hold 20% higher risk assets and 80% lower risk assets. Such de-risking is to be
achieved by way of reducing the holding in the CAF and increasing the holding
in the A65F according to the pre-set allocation percentages at different ages
as detailed below. Diagram 1 below shows the target proportion of investment in
riskier assets over time.
Contributions made by scheme members before age
50 will be fully invested into the CAF. After a scheme member reaches age 50,
the trustee of MPF scheme will start automatically moving some investment
(around 6.7% of assets) from CAF to A65F according to the allocation
percentages in Diagram 2 headed DIS de-risking table. This process will
continue until the scheme member reaches age 64 when all assets will be held in
A65F.
Diagram 1: Asset Allocation between the DIS
Funds according to DIS
Note: The exact proportion of the portfolio in
higher/lower risk assets at any point in time may deviate from the target glide
path due to market fluctuations.
Diagram 2: DIS De-risking Table
Age |
Core Accumulation Fund |
Age 65 Plus Fund |
Below 50 |
100.0% |
0.0% |
50 |
93.3% |
6.7% |
51 |
86.7% |
13.3% |
52 |
80.0% |
20.0% |
53 |
73.3% |
26.7% |
54 |
66.7% |
33.3% |
55 |
60.0% |
40.0% |
56 |
53.3% |
46.7% |
57 |
46.7% |
53.3% |
58 |
40.0% |
60.0% |
59 |
33.3% |
66.7% |
60 |
26.7% |
73.3% |
61 |
20.0% |
80.0% |
62 |
13.3% |
86.7% |
63 |
6.7% |
93.3% |
64 and above |
0.0% |
100.0% |
Note: The above allocation between the CAF and
A65F is made at the point of annual de-risking and the proportion of the CAF
and A65F in the DIS portfolio may vary during the year due to market
fluctuations.
For the member invests into DIS of Haitong MPF Retirement
Fund, in general, if a member’s birthday is not on a dealing day or specified
instructions (including but not limited to subscription, redemption or
switching instructions) are already being processed on the member’s birthday,
then the investments will be moved on the next available dealing day. When one
or more of the specified instruction (including but not limited to
subscription, redemption or switching instructions) are being processed on the
annual date of de-risking for a relevant member, the annual de-risking will
only take place after completion of these instructions where necessary. Please
refer to the MPF
Scheme Brochure for details.
B. Statutory Fee Control
The amount of fees charged to an MPF CF has a
significant impact on long-term investment outcomes.
According to the law, the aggregate of the
payments for services charged to the CFs in the DIS must not, in a single day,
exceed a daily rate of 0.75% per annum of the net asset value of each of the
DIS Funds divided by the number of days in the year (including asset based fees
paid for service of trustee, administrator, investment fund manager, etc. but
not out-of-pocket expenses). The fees for recurrent operational expenses shall
not in a single year exceed 0.2% of net asset value of each DIS Constituent
Fund.
Members should note that there are a number of
attributes of the design of the DIS which affect the types of risks associated
with the DIS. For more details on key risks relating to the DIS, please refer
to the MPF
Scheme Brochure below.
III. How does DIS affect you?
If you set up a new account in the Haitong MPF Retirement
Fund (“Retirement Fund”) on or after 1 April 2017(“Effective Date”) and you do
not make any investment choice, your future contributions and accrued benefits
transferred from another scheme (collectively, “Future Investments”) and your
accrued benefits will be invested in accordance with the DIS. If you have
accounts in the Retirement Fund that are set up before the Effective Date
(“pre-existing accounts”), depending on whether you have previously made any
fund choices, the DIS may affect you in different ways.
If you have already given a valid investment
instruction for the accrued benefits and Future Investments in your
pre-existing account or you are 60 years old or above before the Effective
Date, you will not be affected by the implementation of the DIS.
If all your accrued benefits in a pre-existing
account are invested in the existing default arrangement as at the Effective
Date and you have not given a valid investment instruction for the pre-existing
account, you will receive a separate notice (i.e. the “DIS Re-Investment
Notice”) on or before end of September 2017. The DIS Re-Investment Notice will
explain that if you do not make an investment choice by replying within 42 days
, your accrued benefits in the existing default arrangement will be redeemed in
whole and re-invested in accordance with the DIS. Therefore, if you receive the
DIS Re-Investment Notice, please pay special attention to the contents and make
appropriate arrangements. You should note that the risk of the existing default
arrangement may be different from that of the DIS and you may be exposed to
market risks as a result of any reinvestment of your accrued benefits in the
DIS.
There are special circumstances. Where all your
accrued benefits in the pre-existing account are transferred from another
account within the Retirement Fund (eg. in the case of cessation of employment
where accrued benefits in your contribution account are transferred to a
personal account within the Retirement Fund), your accrued benefits in the
pre-existing accounting will be invested in the same manner as they were
invested immediately before the transfer, but your Future Investments may be
invested in the DIS after implementation of the DIS, unless otherwise
instructed.
The implementation of the DIS may affect the
investment of both your accrued benefits and future contributions. If you are
in doubt about the impact of the DIS on your accrued benefits and future
contributions, please do not hesitate to contact the Trustee of the Retirement
Fund.
For details of DIS of Haitong MPF Retirement
Fund, please refer to the MPF
Scheme Brochure below.
IV. Do you need to do anything?
Apart from the above, there are other circumstances where
your accrued benefits or future contributions may be affected by the
implementation of the DIS. If you have any query on how the DIS will affect you
and what actions you need to take, you should call the Haitong MPF 24 Hours
Auto-Info-line at (852) 2500 1600 or the Haitong MPF Employers Hotline at (852)
3663 7288, or visit http://www.htisec.com/asm for more information.
If you receive the DIS Re-Investment Notice
after the Effective Date, you are advised to pay special attention to the
contents and send your corresponding reply to the Trustee as appropriate.
You are free to choose to invest in the DIS if
you agree with its investment strategy and find it suitable for your personal
circumstances. The DIS will generally apply as a default investment arrangement
after the Effective Date if you do not make an investment choice or do not wish
to do so.
V. Management of MPF Accounts
As the DIS represents a major change to the MPF
System, it is timely for members to check their account status to make sure
their details, particularly date of birth and address details, are up-to-date
and also to consider consolidating accounts for ease of their own account
administration.
For details of DIS of Haitong MPF Retirement
Fund, please refer to the MPF
Scheme Brochure below.
MPF Booklets & Publications: https://www.mpfa.org.hk/en/info-centre/publications/mpf-booklets-publications/default-investment-strategy
MPF Scheme Brochure: http://172.30.201.187/hti_content/images/FileUpload/en-US/MPF Scheme Brochure.pdf