Lawmaker Slams 2% MPF Fees vs 0.4% in the US

Legislator Jeffrey Lam, representing the Hong Kong General Chamber of Commerce, used the January Chamber Bulletin to slam MPF management fees for devouring workers’ hard-earned money. Trustees average about 2%, he wrote — indefensible next to the 0.4%–0.6% US retirement plans charge. An MPF fund fees comparison with the US 401(k) makes every worker wince.

How wide is the Hong Kong–US fee gap?

Hong Kong ~2%, the US 0.4%–0.6% — three to four times apart. Lam’s arithmetic stings: for a worker earning over HK$20,000, assuming 5% annual MPF returns minus 2% in yearly fees, 40 years of management fees top HK$1 million — about a third of contributions. An MPF already too small for retirement shrinks dramatically further.

Why are Hong Kong fees so high?

Small scale, high admin costs, no real competition yet. Hong Kong’s small accounts spread across many schemes keep unit admin costs high; without the employee choice arrangement, members cannot vote with their feet, dulling trustees’ incentive to cut. America’s vast, competitive 401(k) market is what keeps its fees down — which is exactly why introducing competition is the real cure.

How can workers protect themselves?

Shop around: pick cheaper funds and schemes. Until the system is reformed, workers have one defence — being smart consumers. Check your funds’ expense ratios against cheaper market options; where there is choice, favour lower-cost passive products like index funds. Every dollar of management fee comes out of your retirement money.

To compare charges and returns across MPF funds, visit MPF fund comparison.