Why does MPF charge admin fees? The MPFA hires independent consultants to study costs

A secondary-school student studying MPF in liberal-studies class noticed newspaper clippings full of opinions about MPF administration fees and asked: why charge them at all? In a November 2011 column, the MPFA’s mascot 積金仔 explained that trustees bear statutory administrative duties — and that most of a scheme’s charges are the cost of those duties. The MPFA would hire independent consultants to dissect the costs.

MPF management fees: what are admin fees?

Beyond investment management fees, MPF trustees charge administration fees because the law requires them to perform specific administrative work: enrolling employers and employees, collecting contributions, allocating them to member accounts for investment, and helping chase arrears. Most of a scheme’s charges are the cost of these functions — so streamlining administration cuts fees.

The consultant study: three levers for lower fees

The MPFA had long pushed fees down through three levers: simplifying scheme administration, improving fee transparency, and intensifying market competition. Over three years, the average fund expense ratio had fallen more than 10%, with every trustee cutting fees or launching low-fee funds. The independent study would analyse administrative costs in finer detail and recommend simplifications to make administration more cost-effective.

The ECA: competition as the best fee medicine

The MPFA hoped to launch the Employee Choice Arrangement in the second half of next year, letting employees move the accrued benefits from their own contributions to a scheme of their choice once a year. More competition plus more employee choice would pressure schemes to cut fees — when members can vote with their feet, charges fall.

What members can do

Admin fees sound abstract but dent your returns every year. Rather than wait for the consultant’s report, check your fund’s fund fact sheet now for its expense ratio — then, in the ECA era, reward reasonably priced trustees with your choice. The MPF education hub breaks down what fees comprise. MPFA hotline: 2918 0102.