Instant fee cuts vs bonus rebates: which MPF deal suits small accounts?

With the Employee Choice Arrangement on the horizon, intermediaries piled into Hong Kong’s MPF price war to capture employee contributions. On 10 November 2011, Fidelity and BCT cut fund charges by up to 20% — worth up to HK$420 a year for someone holding the average HK$150,000 in MPF assets. But with intermediaries offering both instant fee cuts and bonus-unit rebates, which deal actually pays?

MPF fee deals: instant cuts win for small accounts

For members with small balances, instant fee cuts win: the saving shows up in the fund price daily and compounds; bonus rebates are mostly one-off handouts that favour big balances. Fidelity’s cut saves HK$12–28 a year per HK$10,000 of assets; AXA, by contrast, offered HK$1,000 of bonus units on HK$70,000–249,000 of accrued benefits — not arriving until end-April next year.

The numbers: HK$150,000 vs HK$2 million

On the average HK$150,000 balance, Fidelity’s cut saves at most HK$420 a year. On bonuses, AXA rebated HK$38,800 of units in stages on HK$2 million-plus balances — 1.97% over two years — while sub-HK$50,000 balances got HK$100 of units. Timing matters too: most rebates are fixed cash amounts, not units, so a market rally buys fewer units.

BCT’s targeted offers: voluntary at 0.79%, preserved at 0.59%

BCT’s offers were equally targeted: members joining its special voluntary-contribution programme in 2012 paid as little as 0.79% in management fees; over-65s and early retirees at 60 who left benefits unwithdrawn paid as little as 0.59% on preserved accounts — the city’s lowest. Eleven BCT funds dropped to 0.99%–1.625%; five target-date funds to 1.45%.

What members can do

When choosing a scheme, weigh management fees, performance and fund choice together. A simple rule: the smaller the balance, the more instant cuts are worth; only big balances make bonus rebates worth calculating. Whichever sweetener you eye, first check the fund’s category and performance suit you. The MPF education hub teaches the full comparison method.