MPFA Admits Fee Cuts Too Slow, Too Shallow — How Will an MPF Fee Cap End?

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

“We agree fees haven’t fallen fast enough, or deep enough!” MPFA chief executive Diana Chan’s October 2012 line was the first official mea culpa on MPF charges. Under two weeks before semi-portability, the MPFA moved to propose a fee cap to the government — the MPF fee battle was finally shifting from talk toward action.

How far have MPF fees fallen?

From 2.1% to 1.73% — but the market isn’t buying it. The average fund expense ratio fell from 2.1% in 2008 to 1.73% by September 2012. Down, yes — but calls for deeper cuts persisted, and Chan agreed: high fees eroded workers’ returns.

What does the consultants’ report say?

Force cuts via administration and legislation — due late November. The MPFA commissioned first-half research into administration costs; the report, due in late November, would propose cost-cutting. Consultants were expected to advise forcing cuts through administrative and legislative means: digitising services and consolidating accounts were already under way; the boldest ideas — a fee cap and mandatory low-fee funds.

What happens after the report?

To the board, then government; legislation needs consultation. The report would go to the board, then to government. Fundamental reform needed government decision — and public consultation to build consensus.

What is the lesson from 2012?

Admitting fault is reform’s first step. Chan’s 2012 “not fast enough, not deep enough” carried weight: the official line shifted from “the market will adjust” to “we must act.” Whether an MPF fee cap would materialise was unanswered in 2012 — but with the regulator admitting fault, pressure finally reached the trustees.