Consumer Council: A Few Percentage Points in MPF Fees Can Halve 40-Year Returns

High-fee MPF funds can devour your retirement savings. The Consumer Council’s survey of nearly 300 MPF funds found a few percentage points of fees can halve 40-year accrued benefits: at 1% annual fees, 40-year benefits fall 23% (about HK$690,000); raising fees from 1% to 3% cuts benefits 52% (about HK$1.58 million) — assuming 5% annual returns on HK$3.05 million of benefits.

How wide is the fee gap?

Same-category fees can differ twofold: mixed-asset funds range from 1.38% to 2.84%.

What is the FER?

The Fund Expense Ratio (FER) = a fund’s total actual expenses as a percentage of average net assets, calculated to the MPFA’s 2004 disclosure code — covering management, trustee, legal and audit fees. It’s deducted straight from fund assets; members rarely notice.

What the FER doesn’t show

• Enrolment, annual, contribution, bid-offer spread and withdrawal fees (many waived)
• At least two funds charge performance fees of up to 20% of NAV gains
• One scheme charges a HK$50/month dormant-account fee (currently waived)
• Most guaranteed funds need 36–90 months (usually 5 years) of continuous investment for the guarantee — check terms before switching on a job change

Don’t choose on fees alone

The Council reminds: beyond fees, weigh fund objectives, category, track record, trustee service levels and your own risk tolerance. Cheap but unsuitable is still wrong. Compare MPF funds’ fees and returns at MPF fund comparison.