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It is also possible that the very significant funds that will be accumulated under the MPF schemes will be accumulated and if these were to move on in a concerted manner across the exchanges, this would have in fact implications for the monetary management system. Again we will be looking at these measures with great care and to ensure that the advice system to look after this impact.
I note that some Members have expressed concern on the rate of return. This, of course, is a key consideration. The rate of return on privately managed retirement funds has been high in Hong Kong over the long term, with even those funds regarded as average performers having a return of 7 to 8% after inflation. This is considerably higher, better than the likely rate for the CPF. I should stress that a high rate of return will provide contributors, even those on a low income, with more retirement protection in the long term.
Let me also point out that investment returns on retirement funds, like other long term investments, fluctuate from year to year. The majority of retirement schemes in Hong Kong are long term investors. The success of a scheme must be measured by its average investment performance over a longer time horizon. It is misleading to quote one year's result as a measurement of investments in the long term. I note from a recently issued survey of Hong Kong Retirement Schemes in 1994, that while 1994 was a disappointing year, as significant falls in the Asian stock markets affected returns of those schemes with a heavy concentration of assets in those markets, over the longer term returns remain ahead of salary inflation.
Mr Vincent Cheng mentioned a point expressed concern over the effect of retrospective preservation. Scheme participants are, of course, free to terminate an existing scheme anytime they want to, in accordance to the bad terms of the scheme. But most, I'm sure, will realise that it is usually through long-term investments that any pension fund scheme will bring the maximum benefits and they will not easily trade world-run scheme for the immediate freedom from the requirement under the MPF to preserve their accrued benefits. It is simply not in their interest to do so. In any event, a sufficiently long grace period would be provided for employers and employees to comply with the MPF requirements all to wind up their schemes. There is no reason therefore to assume that it will take collective action to wind up all at the same time.