MPF Contribution Rate Unchanged at 5%, Ceiling Raised to HK$25,000 — A 2011 Fidelity View

On 1 December 2011, Fidelity Hong Kong managing director 程劍慧 used her column to cover three things at once: why trustees were cutting fees, why she believed fund returns mattered more than fees, and how the newly passed contribution ceiling rise would cost workers earning over HK$20,000 up to HK$250 more a month.

What changed when the MPF contribution ceiling went up?

Legislators voted to raise the maximum relevant income level from HK$20,000 to HK$25,000 with effect from 1 June 2012, meaning employees earning HK$25,000 or more — and their employers — would each pay up to HK$250 more in mandatory contributions a month, lifting the combined monthly cap from HK$2,000 to HK$2,500, a 25% rise. The minimum level had already been revised from HK$5,000 to HK$6,500 on 1 November 2011, exempting the lowest earners from the employee portion.

Why do returns matter more than fees?

Cheng argued repeatedly that a manager’s track record beats fee levels: within the same fund category, returns between managers could differ by 5%, dwarfing the roughly 1% fee gap. She illustrated compounding with hard numbers — a graduate putting HK$500 a month into an equity fund, plus the employer share, at a 5% average annual return:

A mere two-point return edge meant only about HK$3,500 more after five years — but over HK$900,000 more after 43. Her advice: MPF is long-term money, so don’t keep switching funds to chase market moves, and never judge a fund on one or two years alone — look at three- and five-year records together.

Fee cuts are inevitable, but don’t expect big ones soon

On the wave of trustee fee cuts, Cheng doubted it was really about preparing for the Employee Choice Arrangement — that launch was still far off; it was more about meeting public expectations. Growing assets under management and better admin efficiency made fee cuts the secular trend, but with heavy fixed costs and headcount still in the system, she saw little room for dramatic cuts in the short term.

Contribution rules and fund choices are explained at the MPF education hub.