Default Investment Strategy (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.

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.

• Statutory Fee Control

For the 2 CFs in the DIS, the law imposes the following ceilings on the fees and out-of-pocket expenses:

1. The aggregate of the payments for services of the CAF and A65F 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 CFs divided by the number of days in the year (including, but not limited to, fees paid or payable for service of trustee, custodian, administrator, investment fund manager, sponsor and the underlying investment fund(s) of the respective DIS CFs, etc. but exclude any out-of-pocket expenses incurred by each DIS CFs and its underlying investment fund(s)).
2. The amount of out-of-pocket expenses incurred by the trustee on a recurrent basis in the discharge of the trustee's duties to provide services in relation to the DIS CFs shall not in a single year exceed 0.2% of the net asset value of the DIS CFs.

B. Impact of the new default investment logic on affected member after 1 April 2017

1. For member's existing account with valid investment instruction for the accrued benefits and Future Investments provided by the member or the member reaches age 60 before 1 April 2017, you will not be affected by the implementation of the DIS.
2. For members who is under or becoming age 60 on 1 April 2017, you are affected in the following ways:
   1. For a new member joining a scheme, if the member does not make an investment choice, all accrued benefits and Future Investments will be automatically invested through the DIS. The member can also actively choose the DIS as the preferred investment choice.
   2. For existing member's account which is fully invested in the existing default fund and the member has never given investment instructions, the trustee will send a notice, namely DIS Re-investment Notice to the member within the first 6 months of implementation. If the member does not respond, then the member's accrued benefits in the existing default fund will be redeemed in whole and re-invested in accordance with the DIS.
   3. For existing member's account with part of accrued benefits invested in the existing default fund and the member has never given investment instruction, the trustee will invest the accrued benefits in the same manner as accrued benefits were invested immediately before 1 April 2017. Future Investments will be invested in the DIS or in accordance with the member's investment mandate, where applicable and appropriate.
   4. For existing member's account with no investment mandate provided by member but with accrued benefits transferred from another account within the Scheme (including automatic transfer of accrued benefits from contribution account to personal account after cessation of employment, the member's accrued benefits will be invested in the same manner as accrued benefits were invested immediately before 1 April 2017. Future Investments will be invested in the DIS. In the event that the existing member's account utilizing Fund Cruiser, the member will be deemed to have exited the Fund Cruiser, to the extent that the automatic fund allocation programme according to the asset allocation under section 3.3.4 of the MPF Scheme Brochure of the Scheme will be ceased on 1 April 2017.
   5. For members with existing MPF, they can actively choose to invest through the DIS by submitting a fund switching request to their trustees. As in other CFs, members can also switch out of the DIS at any time as permitted by scheme rules.

C. Dealing day of annual de-risking

The de-risking is achieved by annual adjustment of asset allocation gradually from CAF to A65F under the DIS when the member reaches age 50. Switching of the existing accrued benefits among CAF and A65F will generally be automatically carried out each year on a member's birthday according to the allocation percentages in the DIS De-risking Table as shown above. If a member's birthday is not a dealing day, then the investments will be moved on the next available dealing day. Moreover, if at the time of annual de-risking, there is one or more of the specified instructions (including but not limited to subscription and redemption, for example, transfer instructions, withdrawal instructions, instructions for refund or payment of any statutory long service / severance pay, change of investment mandate instruction or switching instructions) are being processed for a relevant member, the annual de-risking will only take place after completion of these instructions where necessary.

D. Communication of DIS-related information

The DIS Pre-Implementation Notice ("DPN") was sent to all members by January 2017.
To download the DPN, please click here.
To download the MPF Scheme Brochure of the Scheme, please click here
The DIS Re-Investment Notice ("DRN") would be sent to the relevant members whose accrued benefits would subject to be re-invested according to DIS within April starting from April 11, 2017.

There is a reply form (“Option 2 Form”) attached to the DRN. Members are required to complete and send this Option 2 Form to us within 42 days after the date of the DRN (“Expiry Date”) if they wish to stay invested in the existing constituent fund. If members do not reply before the Expiry Date, all their accrued benefits, investment instruction for future contributions and benefits transferred from other MPF schemes (“Future Investments”) will be invested according to DIS within 5 business days after the Expiry Date.

Members should send the Option 2 Form via channels listed in the table below. Otherwise, members may run at a risk that the Option 2 Form may not reach us or may reach us at a time later than what is expected; and in turn affect the investments of the accrued benefits and Future Investments.

The following table sets out the channels and cut-off time for receipt of the Option 2 Form. Any instruction received after the cut-off time will be considered as action taken after Expiry Date which may affect the accrued benefits and Future Investments to change 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.

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.

• Statutory Fee Control

For the 2 CFs in the DIS, the law imposes the following ceilings on the fees and out-of-pocket expenses:

1. The aggregate of the payments for services of the CAF and A65F 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 CFs divided by the number of days in the year (including, but not limited to, fees paid or payable for service of trustee, custodian, administrator, investment fund manager, sponsor and the underlying investment fund(s) of the respective DIS CFs, etc. but exclude any out-of-pocket expenses incurred by each DIS CFs and its underlying investment fund(s)).
2. The amount of out-of-pocket expenses incurred by the trustee on a recurrent basis in the discharge of the trustee's duties to provide services in relation to the DIS CFs shall not in a single year exceed 0.2% of the net asset value of the DIS CFs.

B. Impact to new and existing scheme members since 1 April, 2017, the effective date of DIS

New scheme members

When new Scheme members enroll in an MPF scheme, they will have three options in respect of their MPF investment:

If scheme members do not make any investment choice, their accrued benefits and future investments will be invested according to the DIS automatically. Members can proactively choose to invest according to the DIS, in which case their accrued benefits and future investments will be automatically invested in the Core Accumulation Portfolio and/or the Age 65 Plus Portfolio depending on their age at the time.

Scheme members can invest by choosing different fund types and the investment ratios themselves. Besides existing choices, members will also be able to invest in the new Core Accumulation Portfolio and/or the Age 65 Plus Portfolio individually. However, because in this case members invest in these two funds not because they have chosen the DIS, their portfolios will not automatically de-risk as they get older.

Members should therefore review their portfolio regularly, and make adjustments where necessary.

Existing scheme members

In general, scheme members who, when they first joined an MPF scheme, did not make any investment choice. Their accrued benefits and future investments were 100% invested in portfolio in accordance with the default investment arrangement (i.e. FWD MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio) (now to Sun Life MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio). The trustees will notify relevant scheme members (i.e. the "DIS Re-Investment Notice") within 6 months after 1 April, 2017. Scheme members will then have the opportunity to make fund choices, within 42 days (the "Expiry Date") of notification. If members do not reply before the Expiry Date, their accrued benefits and future investments will be invested according to the DIS within 14 days.

There are special circumstances where the accrued benefits in the pre-existing account are transferred from another account within the Scheme (e.g. in the case of cessation of employment, where accrued benefits in your contribution account are transferred to a personal account within the Scheme), your accrued benefits in the pre-existing account 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 the implementation of the DIS, unless otherwise instructed.

As the existing default fund, FWD MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio (now renamed to Sun Life MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio), is a guaranteed fund, on the Expiry Day, the market value of a member’s accrued benefits in the existing default fund will be compared against the guaranteed value of such accrued benefits. In the event that the market value is less than the guaranteed value, the member’s accrued benefits (including any future investments) will continue to be invested in the existing default fund.

In the case of members who are aged 60 or above before 1 April 2017 and who hold a Pre-existing Account, the accrued benefits, future contributions and accrued benefits transferred from another scheme in the Pre-existing Account will continue to be invested in the same manner as accrued benefits, future contributions and accrued benefits transferred from another scheme (as the case may be) were invested immediately before 1 April 2017, unless the Trustee receives any investment instructions or switching instructions.

C. Illustrative examples on the comparison in value in the FWD MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio (now renamed to the Sun Life MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio)

Example 1: A personal account member did not give any investment instruction and transferred $100,000 to the FWD MPF Master Trust Basic/Comprehensive Scheme (now renamed to the Sun Life MPF Basic/Comprehensive Scheme) on 15 October 2012. 100% of the accrued benefits was invested into the FWD MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio (now renamed to the Sun Life MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio) (i.e. the "existing default fund") on 15 October 2012. On 1 April 2017, such account is identified as a DIA account and a DIS Re-Investment Notice was issued on 1 September 2017 to the member. The Trustee did not receive any reply or investment instruction from the member on 14 October 2017 (i.e. 42 days from the date of the DIS Re-Investment Notice). The market value of existing default fund on 14 October 2017 is $90,000.

The member has continuously invested in the existing default fund for a 5-year period from 15 October 2012 until 14 October 2017, and accordingly the guarantee would apply on 14 October 2017, and the shortfall between the guarantee value and the market value of $10,000 will be credited to the member’s account. Since the guarantee amount of $100,000 is higher than the market value of existing default fund at $90,000 on 14 October 2017, according to the MPF Ordinance, all accrued benefits in the account will remain in the existing default fund and will not be transferred to the DIS. Any future contributions and accrued benefits transferred from another scheme to the member’s account will continue to be invested in the existing default fund.

Example 2: A personal account member did not give any investment instruction and transferred $100,000 to the FWD MPF Master Trust Basic/Comprehensive Scheme (now renamed to the Sun Life MPF Basic/Comprehensive Scheme) on 15 October 2012. 100% of the accrued benefits were invested into the FWD MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio (now renamed to the Sun Life MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio) (i.e. the “existing default fund”) on 15 October 2012. On 1 April 2017, such account is identified as a DIA account and DIS Re-Investment Notice was issued on 1 September 2017. The Trustee did not receive any reply or investment instruction from the member on 14 October 2017 (i.e. 42 days from the date of the DIS Re-Investment Notice). The market value of existing default fund on 14 October 2017 is $110,000.

The member has continuously invested in the existing default fund for a 5-year period from 15 October 2012 until 14 October 2017, and accordingly the guarantee would apply on 14 October 2017, although in this case no shortfall is payable under the guarantee. Since the guarantee amount $100,000 is lower than the market value of existing default fund $110,000 on 14 October 2017, according to the MPF Ordinance, the member’s accrued benefits in the existing default fund will be invested according to the DIS by 28 October 2017 (i.e. 14 days after 14 October 2017). Furthermore, any future contributions or accrued benefits transferred from another scheme into the account after 14 October 2017 will also be invested according to the DIS.

Example 3: A personal account member did not give any investment instruction and transferred $100,000 to the FWD MPF Master Trust Basic/Comprehensive Scheme (now renamed to the Sun Life MPF Basic/Comprehensive Scheme) on 15 October 2015. 100% of the accrued benefits was invested into the FWD MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio (now renamed to the Sun Life MPF Basic/Comprehensive Scheme Capital Guaranteed Portfolio) (i.e. the "existing default fund") on 15 October 2015. On 1 April 2017, such account is identified as a DIA account and a DIS Re-Investment Notice was issued on 1 September 2017 to the member. The Trustee did not receive any reply or investment instruction from the member on 14 October 2017 (i.e. 42 days from the date of the DIS Re-Investment Notice). The market value of existing default fund on 14 October 2017 is $90,000.

The member has invested in the existing default fund for less than 5 years from 15 October 2015 until 14 October 2017, and accordingly the guarantee would not apply. Since no guarantee amount is applicable, the member’s account will be credited with the market value of $90,000. According to the MPF Ordinance, the member’s accrued benefits in the existing default fund will be invested according to the DIS by 28 October 2017 (i.e. 14 days after 14 October 2017). Furthermore, any future contributions or accrued benefits transferred from another scheme into the account after 14 October 2017 will also be invested according to the DIS.

D. Handling of de-risking when clashing with other member's instructions

Below are illustrative examples of operational arrangements on DIS de-risking when the de-risking day (member’s birthday) clashes with other member’s instructions with the assumptions that:

1. The member account has investment in DIS (either by default or he actively chose to invest into the DIS)
2. The future investment mandate of the member account is DIS (either by default or he actively chose to invest into the DIS)
3. The member is at age 54 and will turn age 55 on 14 Jun 2017

1. Contributions and transfer-in monies

Business rule: If contributions or transfer-in benefits are allocated to the member’s account and under the fund subscription process on the member’s birthday, no de-risking of the member’s benefits will be performed on the member’s birthday. De-risking of member’s fund balance will be performed on the next dealing date after units has been subscribed and allocated to the member’s account.