MPF Management Fees at 1% — No Dream? The MPFA’s View

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

The same interview reads differently from another angle. MPFA chairman Wong Yau-kar’s “fees could fall to 1%” mattered less for the number than the path: how MPF management fees travelled from 2% to 1.74%, and onward to 1%.

What did the path look like?

Eleven years, 2% to 1.74%. Average fees were about 2% at the 2000 launch, pushed to about 2.1% by the 2008 financial crisis, then eased to 1.74% by 2012. Every step was ground out — not a natural fall, but competition forcing it.

What drives the next leg?

Employee choice is the accelerator. Wong believed post-semi-portability competition would keep cutting fees; a central-administrator option was also under study, with the consultant’s report due in next year’s first quarter. Two legs: market competition plus institutional reform.

What’s the biggest drag?

The offsetting law. Full portability wouldn’t be discussed within three years because employer-contribution offsetting of severance pay stayed unresolved. Competition can grind fees down slowly, but without removing the institutional ceiling, management fees keep a floor.

What is the lesson from 2012?

“1% is no dream” was a direction in 2012; today it’s in progress. Eleven years from 2% to 1.74% proved fee decline is slow work — but the direction never changed. What workers should remember isn’t the number: every time you exercise choice, every low-fee fund you pick, pushes the path a step forward.