The 0.85% Ceiling and the 1.07% Floor: The Conservative Fund Fee Inversion

MPFA chairwoman Aileen Lau recently told Sing Tao that the 0.85% fee cap on the Default Investment Strategy (DIS) is under a full review and “may be cut further,” with the review targeted for completion next year. The cap was 0.95% before eMPF brought it down to 0.85%, and the actual average charge is only about 0.77%. The ceiling is about to go lower.

Meanwhile, 8 of the MPF market’s 13 “conservative” funds charge MORE than that ceiling — up to 1.07379%. A product sold on low risk costs more than the statutory cap set for the government’s default fund. The risk label and the price tag are inverted. This is a data x-ray: every layer of the inversion, priced out.

Through the data: 13 conservative funds, 8 above the ceiling

Fund expense ratios (FERs) below are from each trustee’s fund fact sheet (Manulife as of 2026-03-31, Hang Seng as of 2026-06-30, the rest as of 2025-12-31):

Three numbers deserve a closer look.

First, the dearest costs about 40% more than the cheapest: 1.07379% ÷ 0.76782% ≈ 1.40x. Same product category, same low-risk positioning, a 40% price gap — with no 40% gap in returns to justify it. Conservative fund returns hug short-term rates by construction, so a fee gap passes through almost intact as a net-return gap.

Second, how the DIS ceiling was built: the 0.85% cap = 0.75% investment management fee + 0.10% out-of-pocket expenses (cut from 0.95% when eMPF launched), while the actual average charge is only about 0.77% (Aileen Lau, Sing Tao interview). In other words, a Core Accumulation Fund holding roughly 60% in higher-risk assets can cost less than a “conservative” fund.

Third, the so-called fee “protection” is effectively dormant: conservative funds waive the administration fee in any month the fund’s return does not exceed the prescribed savings rate. But the 2026 prescribed savings rate is 0.0010% per month, while a normal month for a conservative fund returns about 0.1% (1.2–1.5% annualised, divided by 12) — far above the threshold. The waiver almost never triggers; members pay the full fee in virtually every month. (The clawback clause was dissected in the 2 October piece.)

The compounding toll: 1.07% eats 80% of the return

Conservative funds have delivered roughly 1.2–1.5% annualised net over ten years (BOC-Prudential 1.46%, Principal 1.21%, per the mpf.hk fund database). Put the fee next to that denominator:

• AMTD Invesco charges 1.07379% — 82% of a 1.3% net return. Fidelity charges 0.97549% — 65% of a 1.5% net return. Fees consume roughly two-thirds to over four-fifths of the net return: most of what the product earns passes through the manager’s hands first.
• After inflation it is worse: August underlying inflation was 1.9%, leaving a real return of about −0.6% per year. Members pay up to 1.07% for a product with a negative real return — and pay for the privilege.
• The 0.30 percentage-point gap (1.07379% vs the 0.77% DIS average), illustrated (assuming 3% gross return): on a HK$500,000 lump sum, the gap is HK$19,558 over 10 years, HK$51,803 over 20, and HK$102,917 over 30. On HK$5,000 monthly contributions: HK$10,915 over 10 years, HK$53,348 over 20, and HK$146,874 over 30. Against the average balance of HK$343,242, that is about HK$1,043 extra every year — roughly a fifth of a month’s contribution, evaporated.

The most absurd data point: AMTD Invesco’s conservative fund charges 1.07379% while Hang Seng’s and Manulife’s equivalents charge about 0.77%. Same category, 40% dearer, zero extra return — and members who picked the word “conservative” thought they were choosing safety, not expensiveness.

The way out: four routes, one benchmark

The benchmark first: use 0.85% as the yardstick. Any “conservative” option charging above the DIS statutory cap should face one question: is the word “low risk” worth a price above the lazy-fund ceiling? That ceiling may fall further once the review completes — the distance between ceiling and floor will only widen.

Route one: the annual ECA, into a 0.77%-class plan. Every calendar year, employees may make one Employee Choice Arrangement transfer of their mandatory contributions — into a plan whose conservative fund charges 0.77% (Hang Seng 0.76782%, Manulife 0.76790%), 40% cheaper than 1.07% for the same category. Transfers execute at T+1/T+2 unknown prices with an out-of-market window: split large transfers and avoid rate-decision weeks.

Route two: a cheaper low-volatility alternative. The Age 65 Plus Fund (about 20% in higher-risk assets, about 80% bonds) sits under the DIS cap at roughly 0.77% — about seven-tenths of the dearest conservative fund. The honest caveat: it is not capital-guaranteed and fell with bonds in 2022-style selloffs. It suits those who can tolerate mild volatility but refuse to pay a 40% premium for the word “conservative.”

Route three: the TVC back door. A TVC account can hold the Core Accumulation Fund directly, exempt from the statutory de-risking that starts at age 50 — but that is a different risk class (about 60% higher-risk assets), matched only to those who can stomach the volatility. It is nobody’s safe haven.

Route four: check it yourself. Log in to eMPF’s “My MPF,” and tag the FER on every account — 10 million accounts across 4.75 million members, 2.1 accounts per person (Legislative Council papers). An expensive conservative fund is very likely sitting in one of your forgotten personal accounts, collecting rent.

The ceiling is about to go lower; nobody has ever asked about the floor. Eight conservative funds priced above 0.85% will not cut their fees on their own — but your ECA right resets every 1 January, giving you one vote with your feet each year.