Semi-Portability Sorts the Strong From the Weak: Fee Cuts Need Competition

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

Semi-portability took effect on 1 November 2012. A commentary of the day put it bluntly: high fees and low returns stemmed from no competition and no choice — fund houses had no reason to cut prices (“the money’s collected anyway, returns aren’t guaranteed”). Semi-portability was meant to break that. (The original report was published incomplete; this covers the surviving content.)

How powerful is competition?

20% of employees switching means nearly HK$40 billion. MPF assets then totalled HK$380 billion, about HK$160,000 per person; employees could move their own contributions (roughly HK$80,000-plus). If 20% switched, that was nearly HK$40 billion in new business in a year — no trustee could ignore it.

What does switching cost?

A six-to-eight-week vacuum plus dealing spreads. Selling blind then rebuying blind risks selling low and buying high. Example: a HK$160,000 account, half your own contributions — a 1% round-trip spread costs HK$800. So don’t just chase sweeteners; count the switching cost.

What else did the author demand?

Full portability, and fees tied to returns. The piece urged faster full portability — no more than three years — plus an MPFA fee cap linking charges to performance: charge more, deliver more.

What is the lesson from 2012?

“No competition, no reason to cut” was 2012’s sharpest line. Years later, semi-portability became full-portability debates and fee caps became reality — but the core question never changed: whether workers can vote with their feet is the ultimate force setting fees.