HSBC Insurance and Hang Seng Bank, which together have 33 per cent of the Mandatory Provident Fund market, have joined their competitors in cutting fees on four funds by 0.1 percentage point to 0.7 percentage point.
The banks not only cut fees for the Capital Preservation Fund (CPF), the most conservative investment vehicle, as their rivals did but also reduced fees on others, including some equity-related products.
Market watchers expect other MPF providers to feel the pressure to lower fees if they want to maintain their competitiveness.
HSBC and Hang Seng have used a flat fee rate of 1.95 per cent for all their funds under the MPF scheme. The lower fees will start next month for four funds.
The fee for CPF for both institutions will be lowered to 1.25 per cent, which matches AIA-JF, the third-largest provider. But it is still higher than Bank Consortium Trust, the fifth-largest provider, which charges 1.2 per cent.
HSBC's Tracker Fund will be cut to 1.5 per cent, while the Stable Growth Fund and Balanced Fund will be lowered to 1.75 per cent and 1.85 per cent, respectively.
Jason Sadler, managing director at HSBC Insurance (Asia), said the reductions were appropriate because there was less active investment management involved in those funds. He said there could be room to slice fees for other funds when the MPF system was enhanced, allowing cost savings to be passed on to customers.
Mr Sadler did not identify how many customers would benefit from the reductions, though he said that about 27 per cent of its scheme members were invested in CPF and guaranteed fund.
'More than 50 per cent of HSBC's scheme members will benefit from the fee cut,' a source said.
Manulife, the second-largest provider, started this month to lower fees for its two funds, the CPF to 1.75 per cent and 2 per cent for its interest fund. The move came after AIA-JP and Bank Consortium Trust cut their fees for CPF last month.
'We are considering lowering fees for other funds in the near future,' said Allan Lam, vice-president and regional sales director at AIG Global Pension Asia. At present AIA-JF charges 1.75 per cent to 2 per cent for other funds.
Standard Chartered also said it was considering whether to cut fees for MPF funds.
HSBC Insurance and Hang Seng Bank's combined share of the MPF market: 33%