BOCI-Prudential is offering Unlimited times on changing investment fund instructions with free of charge.

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1 1) My MPF funds are suffering losses so I am considering switching funds. How should I do the fund switching online? Does fund switching involve any fees? Is there a limit on the no. of fund switching exercises I can do each year? You can change your allocation/fund choice(s) via the Fidelity Online ( You may choose to place instruction for Asset Switching and/or Contribution Redirection. Asset Switching means changing the investment allocation of all or part of your existing asset holdings in your MPF account, while leaving the investment allocation of future contributions or transfer-in assets among constituent funds unchanged. Contribution Redirection refers to changing the investment allocation of future contributions or transfer-in assets, while leaving the investment allocation of the existing asset holdings unchanged. The dealing cut-off time for fund switching is 4 p.m. (HK time) on a business day. Any asset switching instruction submitted before the cut-off time will be processed using the fund prices as at the same business day. For contribution re-direction, the instruction will become effective after it is processed by the scheme trustee. There are no charges and limit for the times of placing investment switching instruction each year. If the member would like to change his/her investment mandate for future contribution or rebalance the existing investment account balance, he/she can make order via 1) our designated webpage ( 2) Interactive Voice Response System, 3) Smartphone app, or 4) submit the completed form in written by fax to us. BOCI-Prudential is offering Unlimited times on changing investment fund instructions with free of charge. 2) How was the performance of the Default Investment Strategy funds and the Fidelity SaveEasy funds for the past two years? It is difficult to do a direct comparison between the performance of Default Investment Strategy ( DIS ) and Fidelity SaveEasy Funds. DIS is a combination of funds (invest in Core Accumulation Fund and/or Age 65 Plus Fund), and the combination changes according to each member s age. For the latest performance of the two DIS funds and Fidelity SaveEasy funds, please refer to the following table. Finance Office (October 2018) 1

2 3) For the short-term and long-term as mentioned in the briefing session, what do they mean in terms of time? Generally speaking, time horizon of less than 3 years is being considered as short term and more than 10 years is long term. Referring to our discussion during our briefing session, it depends on the interpretation of meaning of TIME. In terms of Fund Performance, according to MPF guideline, Long Term period should be interpreted as at least / over 5 years or above. On the other hand, below 5 years (i.e. Year to Day up to 3 years) should be classified as Short Term. In terms of Investment Horizon, it means the number of years before your retirement. If your investment horizon is relatively long, you might consider choosing a more aggressive and higher-risk fund; otherwise, consider choosing a lower-risk fund. 4) Do Fidelity and BOC-P offer any MPF funds which invest in North American equities? No, but most of our Lifecycle funds have exposure to North America. Besides, the Global Equity Fund has more than 50% of its investment in North America as of end August Yes, for US/Canadian stock market, our company launched BOC-Prudential North America Index Tracking Fund in September 2012 under our MPF scheme. It aims to achieve long term capital growth by investing in a portfolio of securities traded on the stock exchanges in North America. Finance Office (October 2018) 2

3 The approved Index-Tracking Collective Investment Schemes ( ITCIS ) seeks to provide investment performance (before fees and expenses) that tracks the performance of the FTSE MPF North America Index (unhedged) primarily by adopting a representative sampling strategy. For more details, please refer to the principal brochure of our scheme. 5) Why members have to redeem all their accrued benefits in the existing master trust scheme and transfer such money to the new master trust scheme for new investment when they perform MPF scheme switching? Why can t they have MPF accounts in both schemes (i.e. Fidelity and BOC-P) at the same time? (PolyU) The existing scheme switching arrangement was put in place after considering the practice of similar organizations with two or more MPF service providers, such as the HKSAR government. From an administrative perspective, the employer has operational difficulties, such as in long service payment/severance payment offsetting, if members have employer balances in more than one master trust scheme. Having said that, members can freely transfer the employee mandatory balances to any MPF service provider in the market once a year under the Employee Choice Arrangement. 6) PolyU s normal retirement age is 60 while the retirement age under MPF is 65. Could I withdraw or continuously invest my retirement funds after I retire from PolyU at age 60? Which portion of my MPF benefits will I be entitled to upon my retirement? (PolyU) Members can withdraw 100% of the mandatory portion of their MPF benefits once they reach the age of 65, or at the age of 60 provided they make a statutory declaration of early retirement, or they declare permanent departure from Hong Kong. The employer and employee voluntary portions, on the other hand, can be withdrawn once members leave PolyU service, subject to the vesting scale. If they are over 45 years of age or have 10 or more years of service, the vesting percentage will be 100%. Of course, members can also continuously invest in the MPF funds after retiring from PolyU. 7) I am near normal retirement age. Should I transfer my MPF funds to retail funds or remain in the MPF scheme after my retirement? What are the pros and cons in terms of fees and fund choices? If you reach the age of 65, you are free to choose to withdraw your MPF accrued benefits or not; or if you reach the age of 60 and you do not intend to work, you may also claim your MPF benefits on the ground of early retirement. Comparing with MPF funds, retail funds normally have a wider choice of investment funds (e.g. some sector funds or country/regional funds), however, fees are normally higher for retail funds. In addition to investment management fees, retails funds may also charge initial fee, switching fee and redemption fee. Finance Office (October 2018) 3

4 First of all, referring to above mentioned situation, we would like to draw your attention to the following points before making a decision on how to manage your MPF benefits: 1) Consider your personal needs 2) Learn more about the operation of MPF funds 3) Find out the withdrawal rules of MPF contributions 4) Review your investment portfolio Regardless of which method you choose to withdraw your MPF benefits, the value of these assets may change due to market fluctuations, and you should be aware of the investment risks involved. In addition, your account will, as usual, be subject to management fees and other charges by the trustees based on its TOTAL ASSET VALUE. Secondly, for the comparison in terms of fee between MPF vs. retail funds, fees of retail funds are not a valid benchmark against the FUND EXPENSE RATIO (FER) of MPF as they have different fee structures. It should be noted that the MPF FER is a unique measure/inclusive figure that pulls together the fees and expenses across all such functions and services, both within the MPF schemes and even from underlying investment pools. Besides, an MPF scheme is not an investment product. It is a bundle of services that goes far beyond simple investment management. It includes collecting and allocating employers contributions, assisting in chasing employers for outstanding contributions, providing statutory reporting to regulators, and administering how and when withdrawals can be made, etc. Therefore, in addition to the costs relating to investment management, costs relating to scheme administration would also be incurred. Fees need to be charged to recoup these costs. MPF funds necessarily incur elements of scheme administration that are not applicable to retail funds in the market. Similarly, regarding fund choices between MPF and retail funds, due to different regulatory requirements under different ordinances, trustees of a mandatory system are expected to have a higher duty of care compared with those of retail products. In order to protect the interests of scheme members, there are stringent investment restrictions on MPF funds. A range of MPF funds with different risk profiles has been made available as MPF fund choices. The major types of MPF funds are Equity Funds, Mixed Assets Funds, Bond Funds, Guaranteed Funds, MPF Conservative Funds and Money Market Funds. Currently, there are more than 400 funds, averaging 10 funds under each scheme, with risk levels ranging from low to high for members to choose. 8) Are there any advantages to retain my MPF account with Fidelity or BOC-P after my retirement from PolyU? Can I withdraw part of my benefits from the MPF account for investment in retail funds, and then transfer the money back to the same MPF account? When you leave the employment of PolyU, your asset will be transferred to a Personal Account, therefore, the management fee will become the standard fee. Finance Office (October 2018) 4

5 If you reach the retirement age of 65, you can withdraw your MPF benefits and invest in other investment vehicles including retail funds. However, after withdrawing the MPF benefits, you will not be able to transfer the money back to your MPF Personal Account. Upon a member s normal retirement, he/she can withdraw the MPF accrued benefits subject to the scheme rules (please refer to Question 12 below). Should a PolyU member decide to retain his/her accrued benefits with BOC-P in a Personal Account upon termination of employment, the same special Fees and Charges offer to PolyU will also apply to such designated Personal Account. In terms of injecting new money in the MPF Personal Account, the new money will be considered as Voluntary Contributions for which we offer the method of Regular Special Voluntary Contributions BUT NO Lump Sum Contribution is available. However, the MPFA intends to launch the TVC (Tax Deductible Voluntary Contribution) next year to which some different rules and regulations may apply. 9) Is there an option for contract staff to put their contract gratuity into their MPF account? (PolyU) Yes. The Employer Special Voluntary Contribution ( employer SVC ) is a tax planning arrangement offered by PolyU, whereby eligible contract staff can choose to have their contract gratuity transferred to their MPF account. While the gratuity payment is fully taxable when paid out in cash, the employer SVC will be tax exempt if the staff member leaves PolyU service upon retirement at age 60 or have 10 or more years of PolyU service. Otherwise, the taxable portion of the employer SVC will depend on the years of PolyU service. 10) Is there a minimum holding period for bond funds under the MPF scheme? No, there is no minimum holding period for bond funds. Investing in our bond fund is just like investing in other funds under our scheme for which there s no minimum holding periods. 11) Do the Asia Pacific Equity Fund under Fidelity and the Asia Equity Fund under BOC- P include China market? Yes, Fidelity s Asia Pacific Equity Fund has exposure to China market. Yes. According to our Investment Policy, this fund will invest mainly in equities in the various stock markets in Asia including but not limited to those in Australia, New Zealand, China, Hong Kong, India, South Korea, Singapore, Malaysia, Taiwan and Thailand. For more details, please refer to the principal brochure of our scheme. Finance Office (October 2018) 5

6 12) For members who are eligible to withdraw their MPF benefits at age 65 or at age 60 with early retirement declaration, can they do the withdrawal by installments? Is there a limit on the no. of withdrawals? Any charges on such withdrawals? Members can withdraw their MPF benefits by instalments on the ground of: 1) Attaining the retirement age of 65; or 2) Early retirement (age 60-64) This arrangement is not applicable to other statutory reasons of withdrawal. There are no charges and limit for the times of withdrawal each year. Yes. Under the law from 1 Feb 2016, once the member has reached the age of 65 or 60 on ground of Normal/Early retirement, he/she can withdraw the accrued benefits in a lump sum, or by instalments, or retain all for continuous investment. BOCI-Prudential will process free of charge withdrawals for the first FOUR instalments of a scheme member in a year. Nevertheless, our scheme member may be charged with a handling fee of HK$100 per each additional partial withdrawal if more than 4 withdrawals by instalments from the same MPF account are made in a calendar year. Finance Office (October 2018) 6