MPFA to study MPF fees: streamlining administration, expense ratios down over 10% in 3 years

A colleague’s birthday wish — “I hope to retire early and enjoy life” — sparked a newsroom-style debate about MPF fees. A November 2011 MPFA column used the conversation to report: the MPFA had long pressed trustees on fees, the average fund expense ratio had fallen more than 10% in three years, and independent consultants would next dissect administrative costs for further savings.

MPF fees: how did they fall 10% in three years?

The MPFA pushed fees down three ways: simplifying scheme administration, improving fee transparency, and intensifying market competition. Over three years, every trustee cut fees or launched low-fee funds, and the average fund expense ratio fell more than 10%. Most charges are the cost of trustees’ statutory administrative work — enrolment, contribution collection, account allocation, arrears chasing — unlike retail funds.

The consultant study: the next fee-cut engine

Independent consultants would analyse administrative costs in detail and recommend simplifications to make administration more cost-effective. Their findings would underpin the next round of cuts — upgrading from “urging” fee reductions to “finding” them with data.

The ECA: competition as institutional fee pressure

The column also noted the Employee Choice Arrangement expected in the second half of next year, letting employees move their own contributions’ accrued benefits to a chosen scheme once a year. More competition is itself a fee-cutting mechanism: when employees can vote with their feet, trustees cut fees not because they are urged to, but to survive.

What members can do

From birthday wish to fee study, the column’s real message was: prepare for retirement young, and managing MPF is part of preparation. Rather than wait for the consultants’ report, check your fund’s expense ratio now — after the ECA, you will have the right to move money to cheaper schemes. The MPF education hub breaks down fee components. MPFA hotline: 2918 0102.