MPF fund fees comparison and provider choice: don’t switch for switching’s sake

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

With Hong Kong’s Employee Choice Arrangement expected in 2012, employees would soon pick their own MPF provider for current and past mandatory contributions. But how should workers choose among so many trustees? A senior vice-president at an MPF trustee warned against following the herd and urged a whole-picture assessment.

How should employees choose an MPF provider?

Start by asking whether your current provider’s service, fees, fund choice and performance already meet your needs — if so, there is no reason to switch. If a move is warranted, assess the whole picture, because every dollar of contributions is hard-earned money that determines whether your retirement turns out as planned.

MPF fund fees comparison: why does the expense ratio matter more?

An MPF fund fees comparison should go beyond the headline management fee, which covers only the trustee, custodian, administrator, investment manager and sponsor. The fund expense ratio — total actual expenses as a percentage of average net assets — captures every charge and is the fairest way to compare what a fund really costs you.

What should savers weigh in fund choice and service?

Fund choice need not be the longest menu, but it should be diversified: your risk appetite and goals change through life, and a broad line-up lets you switch as needed. On service, check transparency, whether fund factsheets are readable, how long online switches take, and how responsive client support is — all of which shape your day-to-day experience.

More explainers on MPF fees and fund choice are available at the MPF education hub.