MPF Fees Could Fall to 1%: The MPFA Says Competition Will Do It

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

MPFA chairman Wong Yau-kar said eleven years of MPF had cut average fees from about 2% to 1.74%. He believed fiercer competition could push them lower — possibly to 1% — but full portability wouldn’t return to the table within three years.

Why did fees fall?

Competition was the only answer. Fees went from about 2% in 2000, up to 2.1% in 2008 (the financial crisis pushed them up), then down to 1.74% — all through market competition, Wong said; the Employee Choice Arrangement would intensify it. Still, he admitted room remained.

Would a central administrator save money?

Not necessarily. On government-run central administration, Wong said it needed study: every trustee runs its own computer system, so a central platform meant building a new one — cost-benefit had to be weighed. Consultants were engaged, with results expected in the first quarter of next year.

Would full portability return?

Not within three years. With the offsetting law unresolved (employer contributions offset severance), the MPFA said full portability was off the table for years.

What is the lesson from 2012?

“1%” in 2012 was a chairman’s vision; today some funds live it. It took eleven years to go from 2% to 1.74%, and years more toward 1% — fee declines were never linear, only moving when competition, regulation and technology pushed together. Remember that pace next time someone says “fees will fall fast”.