Unlocking MPF Won’t Cut Fees Fast: Charges Unlikely to Plunge Soon

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

Semi-portability launched, with trustees’ perk wars already raging. But one academic argued Hong Kong’s thin investment-product shelf — plus trustees outsourcing MPF management — left little room for near-term fee cuts. Admin fees might reach 1% eventually; management fees were another story.

Why so hard to cut?

Few products, sticky costs. CUHK’s Chuang Tai-liang said management fees track product risk — high-risk products cost more — and Hong Kong’s limited shelf capped discounting room. Only more products would widen the room.

How did the industry reply?

Scale will do it. AIA’s Bonnie Tse said fees follow fund scale — eleven years had built HK$387 billion, with the overall expense ratio down 18% in four years to 1.73%; further ratio declines would keep cutting fees. AIA also offered a 0.2% permanent management-fee rebate under employee choice.

What should switchers avoid?

The six-to-eight-week gap. Chuang proposed a central clearing platform with the MPFA as middleman, replacing bank cheques; getting transfers under four weeks would already be good.

What is the lesson from 2012?

The academic’s 2012 line — few products, little room to cut — was the calmest rebuttal of “competition automatically cuts fees”. Competition is necessary, not sufficient: with too few products to choose, switching just reshuffles the same deck. The warning still applies to today’s fee debates.