Why Hong Kong paid the highest MPF fees among four markets in 2012

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

In May 2012, an industry joint group — the insurance federation, the investment funds association and the trustees’ association — commissioned Ernst & Young to assess Hong Kong’s MPF system. The verdict: a 1.74 per cent management fee, far above Australia, Singapore and Britain. Why was Hong Kong so much pricier?

Why did Hong Kong’s MPF fees exceed those abroad?

Two structural reasons: a small asset base, and an SME-dominated employer landscape that kept administration inefficient. As of May 2012, Hong Kong had accumulated only HK$365 billion in MPF assets, leaving little base over which to spread fixed costs; meanwhile 90 per cent of employers were SMEs, most handling MPF paperwork on paper rather than digitally, pushing administration costs up.

MPF fund fees comparison: what the 1.74 per cent covered

The 1.74 per cent was not a single charge: it bundled fund management fees, trustee fees and member administration fees.

Was there a timeline for fee cuts?

The investment funds association chairwoman said that, with regulations unchanged, fees could fall to 1.18 per cent once assets reached HK$1 trillion. The outgoing insurance federation chairman added that low digitalisation among SMEs was a structural cost driver — but expanding assets and better efficiency pointed to lower fees ahead.