The 2030 fee forecast: how Hong Kong’s MPF charges were expected to fall

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

As of May 2012, MPF assets had passed HK$365 billion and the overall fee rate stood at 1.74 per cent. A joint industry group — the insurance federation, the investment funds association and the trustees’ association — published research arguing fees still had plenty of room to fall as assets grew.

Will MPF fees come down as assets grow?

Yes. Assuming 5 per cent annual asset growth, the pool would reach HK$1 trillion by 2022, and fees could fall from 1.74 per cent to 1.18 per cent by 2030. As of May 2012, about 60 per cent of operators’ costs were fixed, so scale alone would dilute charges; the estimate excluded efficiency gains.

The projected timeline

The investment funds association chairwoman told a press briefing the numbers assumed zero efficiency improvement; any gains would only accelerate the fall.

Highest by rate, reasonable by cost per member

The trustees’ association chairman noted Hong Kong’s fee rate was the highest against Australia, Chile, Singapore and the United Kingdom. But measured as average annual cost per member, charges were reasonable — stripping out some administration costs, trustees and service providers averaged only about 1 per cent, in line with overseas markets. With Hong Kong’s system still young, further improvement was likely.

What would drive fees down? Scale plus efficiency

The outgoing insurance federation chairman concluded that expanding asset scale would keep pushing fees down. The industry also expected the Employee Choice Arrangement, due later that year, to lift efficiency through shared data and easier account consolidation.