Fidelity sees room for MPF fee cuts after semi-portability launch

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

A Fidelity Hong Kong executive said in July 2012 that once MPF semi-portability took effect, members’ wider choice would push providers to cut fees to win clients — though the scale of any cuts was hard to predict. Fidelity had cut fees once in November 2011 and had no immediate plans for another round, saying it did not rely on fee cuts to attract clients.

Why did the retirement readiness index fall?

Fidelity surveyed 857 people aged 25 to 65 in April–May 2012, finding the retirement readiness index had dropped from 54.2 per cent in 2010 to 50.2 per cent. The executive blamed three factors: volatile markets shrinking members’ assets, investors cutting back on private savings outside MPF, and conservative investment stances leaving returns trailing inflation. Among 25- to 44-year-olds, half chose conservative investments and lagged the market — which is why 64 per cent named inflation the biggest risk to post-retirement income.

What could workers do?

He suggested the government raise the minimum monthly MPF contribution, offer related tax relief, encourage personal voluntary contributions, and add personal finance to secondary school curricula. His advice to workers: start financial planning early, review portfolios regularly, seek professional advice, and talk to different providers.

The story’s real point was how providers read the post-semi-portability fee pressure: competition would push fees down as a trend, but Fidelity’s refusal to join a price war showed providers had different calculations about selling on price.