0.26% in America, 1.36% in Hong Kong: A Fivefold Fee Gap Worth a Million Dollars

The same retirement money costs very different amounts depending on where it sits. Participants in America’s 401(k) plans paid an average of 0.26% a year for equity mutual funds in 2024. Hong Kong MPF members paid a market average of 1.36%. The gap is not a rounding error. It is 1.10 percentage points — more than fivefold. On the desk’s standard illustration of HK$5,000 a month at a 7% gross return, that gap is worth about HK$1,106,000 over 30 years, more than three times today’s average MPF balance. Fees are not a detail. Fees are the return.

The core proposition: the same market logic, two fee worlds

The Investment Company Institute (ICI) report “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2024”, published on 16 July 2025, puts the average expense ratio incurred by 401(k) participants in equity mutual funds at 0.26% in 2024, down 66% — 50 basis points — from 0.76% in 2000. Target-date funds fell further still in proportional terms, from 0.67% in 2008 to 0.29% in 2024, a 57% decline. Even the average paid by all American equity-fund investors, 0.40%, sits far below the Hong Kong level.

In Hong Kong, the mpf.hk fee-history database puts the market-average Fund Expense Ratio (FER) at 1.36%, with the Default Investment Strategy (DIS) averaging about 0.77% in practice. Hong Kong’s cheapest mainstream option — the DIS — therefore still costs 2.7 times the average American target-date fund. The Hong Kong market average costs 5.2 times the average American 401(k) equity fund.

State the comparison’s limits plainly, before the numbers do any misleading. The ICI’s 0.26% is an asset-weighted average of what participants actually paid. The MPFA’s average FER is likewise weighted by each constituent fund’s net asset value, for financial periods ending in the year to 31 March 2026. But the fund universes differ: the American figure covers equity mutual funds only, while the Hong Kong figure covers all constituent funds, including bond, guaranteed and conservative funds. This is not a laboratory-controlled comparison. Yet a 1.10-point chasm is far too wide for definitional differences to explain. Definitions can account for a few tenths of a point. They cannot account for fivefold.

The data: the gap is not one number, it is four layers

MPF Ratings’ third-quarter 2026 figures put MPF total assets at about HK$1.68 trillion across 4.97 million members, an average balance of HK$338,950. On that average balance, the 1.10-point gap costs about HK$3,728 a year; even the narrower 0.48-point gap between the DIS and American target-date funds costs about HK$1,627 a year. Scaled to the whole system, HK$1.68 trillion at 1.36% implies about HK$22.8 billion a year in fees; at 0.26%, about HK$4.4 billion. The difference, about HK$18.5 billion a year, is illustrative arithmetic, not a fee forecast — but it measures the order of magnitude. A retirement system of a small economy pays roughly an extra HK$18.5 billion a year for its fee structure.

Why is America so cheap? Scale is the first answer. At the end of 2024, 401(k) plan assets totalled US$8.9 trillion, 38% of it in equity mutual funds. Hong Kong’s MPF system, at about HK$1.68 trillion — roughly US$215 billion — is less than one-fortieth that size. Scale spreads fixed costs, and that is the most honest explanation for falling fees.

The second answer is the shape of competition. American fee compression has been driven by indexation and by collective investment trusts (CITs), lower-cost vehicles that have steadily taken target-date market share in large plans: index equity ETFs now average just 0.14%. Employers, as plan fiduciaries, carry a duty to secure reasonable prices for participants, and fee litigation has turned “expensive for no reason” into a legal risk.

The third answer is the one that stings for Hong Kong: small American plans are expensive too. Data from the 2025 401k Averages Book shows total fees averaging 1.08% for US$5 million plans, against 0.76% for US$50 million plans. Expensiveness is not a matter of nationality; it is a matter of scale. And Hong Kong’s entire MPF system — HK$1.68 trillion of it — prices like a small American plan. A system of that size charging small-plan prices is what the mirror reveals.

Hong Kong is not without cheap options. The latest mpf.hk rankings show the BEA Hong Kong Tracker Fund at about 0.58%, the Fidelity Hong Kong Tracker Fund at about 0.74%, and HSBC’s North American Equity Tracker at about 0.82%. Those figures prove that fees around 0.6% are achievable inside the same market and the same regulatory framework. The question was never “can Hong Kong do it”. It is “why does the average remain 1.36%” — because most members’ money still sits in funds charging above 1.3%, not in trackers or the DIS.

The compounding toll: 1.10 points over 30 years is a million dollars

The illustration below follows the desk’s standard method throughout: HK$5,000 a month, a 7% gross annual return, monthly compounding, before inflation and tax. It compares only the fee gap itself, not any fund’s forecast return.

Read the figures correctly. The 30-year HK$1,106,000 is not cash missing from an account; it is the difference in terminal value between a high-fee and a low-fee path under the same gross-return assumption. It equals 3.3 times the average balance of HK$338,950, or about 11.5 years of living expenses at HK$8,000 a month. Even on the kinder comparison — the DIS against American target-date funds — the 30-year difference is still HK$513,000. Hong Kong’s cheapest mainstream option still pays half a million for its fee structure.

The US Department of Labor’s oft-cited rule of thumb points the same way: over a 35-year career, a 1-point fee difference can reduce a retirement balance by about 28%. The desk’s illustration corroborates it. A fee does not just take a small slice each year; it takes a layer off the compounding base every year, and the longer the horizon, the more it takes.

The breakthrough: the gap can be moved, but only on MPF’s own rules

Step one is to check your own number. The MPFA’s MPF Fund Platform lists the latest FER for all 382 constituent funds, as at 30 September 2026. Find the FER of each fund you hold, then find the FER of the tracker fund and the DIS Core Accumulation Fund in the same category. Comparisons must stay inside the category: Hong Kong equity against a Hong Kong equity tracker, global mixed assets against the DIS — never a guaranteed fund’s fee against an equity fund’s.

Step two is to cut fees inside your existing plan first. Switching funds within the same trustee’s plan is free apart from necessary transaction costs (section 34 of the General Regulation) and is not limited in frequency. Moving from an active Hong Kong equity fund to the same plan’s Hang Seng tracker, or from a high-fee mixed fund to the DIS, is an in-plan switch: it uses no annual transfer quota and is not gated by the 21 December portability launch. Execution must respect MPF’s forward-pricing mechanism: instructions execute at the unknown T+1/T+2 price, so no one can trade the day’s market. The transit gap is about one to two weeks out of the market; on a HK$250,000 balance, a 2% move during transit is about HK$5,000. That number belongs on the same page as the 30-year fee saving, not feared on its own.

Step three is to use full portability from 21 December. From that date, employees who joined on or after 1 May 2025 may transfer their employer mandatory-contribution balances in full to a scheme of their choice once per calendar year — about one million people, 48 days from today. The real value of a transfer is not the time-limited bonus — the desk’s 23 October tracker showed bonuses are typically eaten by the fee gap within one to three years — but a permanently lower-fee home. Compare trustees at the scheme level before moving: the mpf.hk fee-history database puts BEA’s current sample average at about 1.07% against Manulife’s about 1.42%, a 0.35-point gap worth about HK$863 a year on a HK$250,000 balance.

One final caution about reading the American experience correctly. The fall from 0.76% to 0.26% took 24 years, driven jointly by indexation, scale, employer bargaining power and litigation pressure. Hong Kong’s eMPF platform fee has already fallen from 0.37% to 0.29%, and that administrative saving is passing through — but the investment-management and sponsor-fee layers have not loosened by anything like the same amount. The MPFA has already asked trustees to submit five-year fee-reduction strategic plans. What members can do is vote with their eyes before voting with their feet: check the FER, compare within the category, cost 30 years — and only then decide whether to move. A fivefold fee gap is not fate. It is a measurable, comparable number, and after 21 December it is one members can act on.