Semi-portability delayed a year — workers to pay HK$770 million more in fees

Years in preparation and due early next year, MPF semi-portability has suddenly been pushed back at least a year. The cause: the MPFA found a serious hole in the original design — no way to punish unlicensed MPF selling — and must urgently legislate to regulate 20,000-plus intermediaries before launch.

What does a year’s delay cost?

Workers pay at least HK$770 million more. MPF management fees run as high as 1.89%; HKUST economist Francis Lui slams trustees for overcharging, arguing competition from semi-portability could cut fees by 0.5 to 1 percentage point. On HK$153.8 billion of transferable assets, a one-year delay in fee cuts conservatively costs Hong Kong’s 2.2 million employees at least HK$770 million.

Why was the MPFA caught napping?

The hole was there all along. The 27,000 intermediaries are licensed by the HKMA, SFC or Insurance Authority, then register with the MPFA to pitch products to 2.2 million workers. But if they mislead workers, the MPFA’s only weapons are administrative measures and guidelines — no legal authority. The board decided only last month to seek legislation and defer semi-portability. Lawmakers blasted the authority for maladministration; an MPFA source conceded it was “late to the game”. Deputy secretary Leung Fung-yee said the delay protects investors and shouldn’t last long.

Stopgap: the MPFA will write to 200,000-plus employers urging them to offer more than one trustee for employee choice. MPFA board member and legislator Wong Kwok-kin estimates legislation within a year, with semi-portability possible in 2012.

To compare trustee management fees, visit MPF fund comparison.