BEA Trustees Slashes MPF Fees by 30% Ahead of Employee Choice Arrangement

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

Bank of East Asia (Trustees) has announced fee reductions of over 30% on three of its MPF funds effective 1 June 2011, moving early to win business once the Employee Choice Arrangement (ECA) takes effect. Management fees on two MPF conservative funds fall from 1.20% to 0.79% per annum, while the Global Bond Fund drops from 1.45% to 0.99%.

How big are the cuts, and which funds benefit?

Conservative funds down 34%, the Global Bond Fund down 32%. The two MPF conservative funds under the BEA (MPF) Master Trust Scheme and BEA (MPF) Industry Scheme see fees cut from 1.20% to 0.79% p.a.; the BEA (MPF) Global Bond Fund under the Master Trust Scheme falls from 1.45% to 0.99% p.a. Patrick C.M. Li, Director & Chief Executive of BEA Trustees, said he was confident members would warmly welcome the reductions and that they would sharpen the firm’s marketplace competitiveness.

Why cut now?

To get ahead of ECA competition. Once the Employee Choice Arrangement launches, employees can annually move their mandatory employee-contribution accruals to a scheme of their choice — and trustees are already cutting prices to attract them. BEA Trustees’ two MPF schemes serve over 480,000 members with more than HK$13 billion in assets as at 31 March 2011; the cuts clearly aim to defend and grow that base before semi-liberalisation begins.

Are MPF fee cuts the broader trend?

Yes — the fund expense ratio has already fallen from 2.1% to 1.85%. Between 2008 and 2011 the MPF fund expense ratio dropped over 10%, with HSBC, Hang Seng, Principal and others all cutting. As ECA intensifies competition, further reductions are likely — members should actively compare charges and performance across schemes. See our MPF fund fees comparison.