Rebate war opens before Employee Choice: BOCI-Prudential moves first, HSBC ponders loyalty scheme

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

A year before the Employee Choice Arrangement (semi-portability) launches in July 2012, the MPF fee war has begun: Hong Kong’s second-largest provider BOCI-Prudential is the first mover, offering a 0.1-percentage-point management-fee rebate to all members with accounts above HK$250,000, effective immediately. Market leader HSBC says it’s studying a loyalty programme for MPF customers but has no rebate plans.

Why move now?

Positioning for Employee Choice, chasing high earners. CEO Edward Chen Yu-chang said BOCI-Prudential is the first of the top five providers to offer rebates, hoping they’ll attract more high-income clients once workers can choose providers next July. With 2.51 million MPF members averaging HK$150,529 in assets as of 31 March, the HK$250,000 rebate threshold is clearly aimed at the wealthier end.

Will the fee war spread?

Blanket fee cuts this year look unlikely. Chen said the industry already cut fees early this year, so across-the-board cuts in the second half are unlikely. Meanwhile the government’s proposed floor for employee mandatory contributions rises from HK$5,000 to HK$6,500, effective 1 November; the ceiling moves from HK$20,000 to HK$25,000, lifting the maximum monthly contribution from HK$1,000 to HK$1,250 — contributions rise, but whether fees follow downward depends on how providers fight for clients in the choice era.

To compare providers’ fees and rebates, see our MPF fund fees comparison at MPF fund comparison.