Principal: MPF Is No Cash Cow — Below 1.3% There’s No Profit

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

Five MPF operators carve up over 70% of the market; a dozen-plus small and mid-sized trustees fight over the rest. Principal Trust Asia CEO Rex Yip said competition was fierce — no cash cow here. Cut fees further and even they couldn’t cope.

Are US fees cheaper?

No — also pricey. Speaking for one of America’s largest 401(k) providers, Yip said US retirement fees commonly exceed 1.2%. Hong Kong’s “double-high” business costs (rents, wages) meant roughly 1.3% was the profitability floor — below that, no profit.

What would government “spicy measures” do?

Disrupt eastward expansion plans. Asked about the MPFA’s two spicy moves — government-run central administration and fee caps — Yip admitted they could derail head-office plans for the east: the parent operates in 18 countries, some with more growth potential. Still, Principal’s Hong Kong commitment stood, with its pace depending on regulators.

What is the lesson from 2012?

“No cash cow” and “citizens find it expensive” can both be true. Principal’s 2012 line — no profit below 1.3% — doesn’t contradict workers finding 1.74% expensive. Different cost structures, different perceptions. The debate’s real question was never who lied, but whether the system could host choices with different cost structures and let citizens pick.