A decade of MPF: fast-track the Employee Choice Arrangement — full portability is the real cure

After the budget, public attention fixed on the HK$6,000 handout — and the MPF became a target too. Grievances over “low returns, high fees” were already simmering; the HK$6,000 injection poured fuel on the fire. Commentator Tsuen Ching argues the government must not only roll out the MPF “semi-portability” scheme quickly but comprehensively review the system: full portability, index funds, and incentives for voluntary contributions.

Why are fees so hard to cut?

Because only employers get to choose — employees get no say. Some MPF management fees run near 2% a year, and the root cause is that only employers can choose the trustee; employees have no voice, stifling competition. The Employee Choice Arrangement lets employees pick trustees for their own contributions, but the author says go further with full portability: let employees choose trustees for all the money in their accounts — boosting competition to cut fees and letting members consolidate funds for easier management.

How can returns improve?

Mandate index funds and force trustees to cut fees. The author compared actively managed funds’ historical returns and found fees often eat them below their benchmarks (e.g. China equity funds vs the Hang Seng China Enterprises Index). The government should require trustees to include index funds — such as the Tracker Fund following the Hang Seng Index — in MPF schemes, giving members a solid, cheap option that pressures trustees to lower management and administration fees.

What would get people to top up voluntarily?

Decent returns and low fees to rebuild trust. MPF contributions are too low — 5% each from employer and employee (capped at HK$1,000) is a drop in the ocean. Encouraging MPF voluntary contributions starts with reasonable returns and low fees to restore confidence; tax allowances could sweeten the deal. The author also slams the MPFA’s public education as threadbare — beyond carnivals and 30-second TV ads, little is done, leaving ordinary workers bewildered by complex investment concepts, let alone earning returns.

“Ten years bring many changes” — after a decade of MPF, the government must seize the moment and optimise the system with members’ future security first.

To compare trustee fees, visit MPF fund comparison.