MPF fee cuts: management fees may have 10% more room to fall

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

Workers tithed 5% of income to MPF each month, most only dimly understanding it. Ahead of November 2012’s “semi-free choice”, a HKU poll found 65% had no correct grasp of what could transfer, and 51% wouldn’t move current-account contributions elsewhere (29% fearing hassle). Against that backdrop, MPF fee cuts became the market focus.

How much room did fees have to fall?

The chief executive of a local MPF consultancy said average MPF fee ratios ran about 1.73% from January through last month, with perhaps 10% more downside by year-end. Some ETFs charged 0.79%–1.23%, but returns might disappoint — choose carefully.

What did workers prioritise in choosing?

The poll of 1,005 contributing adults found fees the top criterion, then own risk appetite and trustee track record. The consultancy chief said fund performance and returns should come first, fees second — since returns are net of fees, they better reflect fund quality.

The expectation-reality gap

Over 70% wanted to control the timing and pricing of fund trades, but MPF deals at “unknown prices” — no specified-price orders allowed. The results showed real operations lagging public expectations, she said.

Confidence in MPF retirement protection also ran low: 56% scored 0–4 out of 10 — a fail. Workers should quickly learn about “semi-free choice”, manage MPF actively, and invest interest and understanding to plan retirement better, she advised.