MPF fund fees comparison: why the cheapest fee isn’t always the best

Adapted from reporting originally published in March 2012.

This MPF fund fees comparison from March 2012 landed just before November’s Employee Choice Arrangement: with trustees cutting fees and launching cheap index trackers to win business, savers were warned not to choose a scheme on price alone.

How high were MPF fees in 2012?

Average MPF charges stood at 1.77%, ranging from 0.39% to 3.93%; mixed-asset funds charged 1.22%–2.72%. A 30-year-old contributing HK$2,000 a month (employer plus employee) at an 8% annual return would accumulate about HK$2.98 million over 35 years before fees — but only about HK$2 million after a 2% management fee, with nearly a third eaten by charges.

Why shouldn’t savers choose on fees alone?

FER calculations rest on providers’ forward assumptions and exclude items like joining fees and bid spreads, so the ratio is only a reference. A fund with a rock-bottom FER but persistently poor performance is still a bad buy; the goal is balance between fees and returns, not the lowest number on the page.

Are passive index funds always the better deal?

Index trackers charge less because managers barely need to manage them — but they can lag active funds in bull markets. As more low-fee trackers launched around the “half free walk”, members needed to go in clear-eyed: cheap has its price. With MPF horizons spanning decades, fees quietly compound into retirement income lost.