What is Default Investment Strategy (DIS)?
The DIS is a new legislative reform of the Mandatory Provident Fund (MPF) system under which all MPF trustees are required to provide the DIS in each MPF scheme with effect from 1 April 2017. The DIS is a ready-made investment arrangement mainly designed for those members who are not interested or do not wish to make a fund choice, and is also available as an investment choice itself, for members who find it suitable for their own circumstances.
The DIS is not a fund - it is a strategy that uses two mixed assets funds, namely the Core Accumulation Fund and the Age 65 Plus Fund which will invest in a globally diversified manner and invest in different assets (e.g. equities, bonds, money market instruments, etc.) in order to reduce investment risks:
- The Core Accumulation Fund: about 60% of the assets of the fund is invested in higher risk assets (mainly global equities), and the rest in lower risk assets (mainly global bonds).
- The Age 65 Plus Fund: about 20% of the assets of the fund is invested in higher risk assets (mainly global equities), and the rest in lower risk assets (mainly global bonds).
If your MPF benefits are invested according to the DIS, once you reach the age of 50, your trustee will automatically adjust the proportion of your investments in the Core Accumulation Fund and the Age 65 Plus Fund, once every year (generally on your birthday), according to prescribed percentages. In other words, your holdings in the Core Accumulation Fund will be progressively reduced, and your holdings in the Age 65 Plus Fund will be increased.
How does DIS affect you?
(1) If you have never provided any investment instructions regarding your MPF before 1 April 2017 (i.e. you did not choose how your MPF benefits are to be invested):
- Currently your MPF benefits should be invested in accordance with the existing default arrangement under your MPF scheme. The trustee of your MPF scheme will send you a DIS Re-Investment Notice (DRN) for you to indicate whether you want to invest your MPF benefits according to the DIS or not.
- If you do not respond to the DRN and do not make a choice within 42 days of the date of the DRN, your MPF benefits will be invested according to the DIS.
- If you do not want your MPF benefits to be invested according to the DIS, you need to reply to the trustee by the deadline set out in the DRN and make an investment choice.
(2) If you have already provided investment instructions regarding your MPF benefits or you are 60 years old or above before 1 April 2017, you will not be affected by the implementation of the DIS:
- You will not receive a DRN and your MPF benefits will not automatically be invested in accordance with DIS. Your MPF benefits will continue to be invested in accordance with your investment instructions.
- If you are interested to opt to invest in the DIS, you will need to specifically submit a switching/change of mandate instruction to the Trustee.
MPF scheme members should ensure their trustees have their latest correspondence address so that they will receive important DIS information from their trustees without delay.