Will MPF fund fees comparison favour members after semi-portability?

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

With the Legislative Council passing the MPF amendment bill, the Employee Choice Arrangement and the statutory intermediary regime both took effect in November, giving workers far more say over their retirement savings. The market’s big question: would a price war break out and bring MPF fund fees down?

Would semi-portability cut fees immediately?

Not immediately. One provider said bluntly that fees were not workers’ only consideration — returns and service mattered too. Sun Life’s senior vice-president for retirement pensions and group insurance said even if some members switched for cheaper fees, no price war would erupt overnight: “Providers watch the market. There are already plenty of cheap funds out there, and they’re not exactly popular.”

Are MPF fees expensive?

Measured against assets, Hong Kong’s MPF was only one-twentieth the size of Australia’s; fees would come down as assets grew. The industry was ready for the reform, she said, with the MPFA running final tests with providers in August and September.

How much room was there to cut?

Fund houses had little room left. An industry source noted only about a fifth of management fees went to fund companies; the rest covered trustee charges, administration and other regulatory costs — leaving fund managers with thin margins to shave.