MPF management fees: why rationalising them helps members most

MPF ended 2011 in the red, down 9.2% on average as of 16 December — its first full-year loss since the 2008 financial crisis. Watching years of contributions shrink is painful, but returns hinge on global markets beyond any government’s or trustee’s control. What can be fixed is the high level of MPF management fees.

Why is rationalising MPF management fees the most member-friendly reform?

High MPF management fees were the system’s most criticised flaw. Between its December 2000 launch and 2011, MPF suffered four losing years, including a 26.02% plunge in 2008. Returns are hostage to global markets and beyond trustees’ control, but MPF management fees steadily eroding members’ contributions are a structural problem — excessive fees were exposed as early as 2007, making fee rationalisation the most member-friendly long-term reform.

Returns and fees in numbers

• December 2000 – March 2011: the MPFA’s dollar-weighted calculation put MPF’s average annual return, net of fees, at 5.4% — above inflation over the same period.
• May 2007: trustees were exposed for charging excessive management fees; under public pressure, some cut fees on selected schemes.
• Consumer Council research: fee-cut schemes accounted for only about one-third of total MPF assets, leaving most schemes’ charges untouched.

The case for concrete fee-cut policies

Setting aside uncontrollable market forces, the government should do more to rationalise MPF management fees so the system can properly serve its retirement purpose. Chief Executive candidates were urged to table concrete proposals on optimising MPF — especially on lowering fees. Whoever ends the erosion of members’ returns by trustee charges would genuinely serve the public. To see how fees compound against long-term returns, visit the MPF education hub.