Fee Cuts Greet Semi-Portability — MPF Management Fees Fall to 0.7%

This article is a rewrite of a report from October 2012.

The Employee Choice Arrangement — MPF “semi-portability” — took effect November 1, 2012, and workers unhappy with “forced gold” finally had a choice. The MPFA expected over 230,000 to switch early. Knowing members resented high fees, trustees cut prices to compete; some new plans charged half their rivals.

How deep were the cuts?

BEA’s index tracker charged just 0.7%. BEA Trustees cut its integrated trust plan from 1.45%–1.55% to 1.2% in July; Manulife, BOCOM and Principal also pushed funds below 1%. New launches competed on price: two new Union Bank equity funds capped at 0.99%; BEA’s upcoming plan offered a Hang Seng tracker at 0.7% — the market’s lowest.

Why were MPF fees so high?

1.74% on average, above Singapore. Since MPF’s 2000 launch, its fee rate had been attacked: 1.74% on average, higher than Singapore and peers. Principal’s Hong Kong chief executive said fee cuts were the trend, with reductions already underway early in the year — “hard to say about the next six months; everyone’s watching how many switch after semi-portability”. Fidelity agreed fees had further to fall, driven by business trends, not just semi-portability.

Is cheaper always better?

Check whether the numbers are comparable. Principal warned: distinguish cumulative from annualised returns, and make sure periods match — comparing January–December against April–March misleads. Guarantee-fund holders faced another trap: policy terms governed whether switching preserved the guaranteed return.

What is the lesson from 2012?

The price war proved competition worked — but cheap is not suitable. The 2012 pre-launch cuts showed competition biting; yet for members chasing low fees, fund performance still mattered most — half the fee with far worse returns is no bargain.