Pension fund fees to be cut

Mandatory Provident Fund fees will be reduced.

Secretary for Financial Services and the Treasury Prof KC Chan said Hong Kong’s government believes there is room for a further fee reduction in Mandatory Provident Fund fees because of the growing size of the pension fund system.

Chan said that decreasing MPF fees has been on the top of the agenda for the government and the Mandatory Provident Fund Schemes Authority. He noted that measures to increase market transparency and promote market competition have already been taken.

Chan also confirmed that the trend of average fund expense ratios and other developments concerning the MPF system are being closely monitored to devise new initiatives to enhance the system.

Chan believes the Employee Choice Arrangement should reduce the system-wide fund expense ratios if more scheme members focus on transferring to lower-fee funds and exert pressure on the industry to further reduce fees and charges. In the ECA, employees may opt for transferring the accrued benefits derived from their MPF contributions to the MPF schemes of their choice.

The MPF is a form of compulsory savings designed to meet the needs of Hong Kong’s rapidly-ageing population. In 2000 the government passed the Mandatory Provident Fund Ordinance and from December 1, 2000 all employees and self-employed individuals earning more than HK$4,000 per month (now HK$6,500) have to contribute a minimum of 5% of their salary up to a maximum amount.