Jake's View | MPF should be in the workers' hands

The Consumer Council found huge variations in management fees with the MPF fund expense ratio (FER) - fees and charges as a percentage of the total fund size - ranging from 0.17 per cent to 4.62 per cent.

I wonder whether the Consumer Council was really able to get to the bottom of this MPF cost scandal. Management fees are only one way in which our forced savings in this misconceived scheme are pilfered and the council has no powers to make the thieves reveal all.

Take the matter of sub-fund fees, for instance. When your MPF manager receives his monthly contributions you may think that he calls his brokers and buys so many board lots of China Mobile or Hutch and then charges you the dealing costs of these purchases plus his published management fee.

What he actually does, however, is route your investment through his headline fund to any of several other funds run by his management firm. These funds then charge the headline fund an additional management fee and you don't get to see what this fee is. Often your money goes several layers down, not just one, with fees all the way back up again.

Then you get initial buy and sell fees, dividend collection fees, fund transfer fees, consolidation fees and the list goes on. Dream of a fee that your fund manager could charge and I guarantee you that he is, in fact, charging you that fee. The biggest reason that almost half of the MPF funds lost money over the past five years is not poor markets but larcenous managers.

There is a simple way out of this conundrum, one which these managers saw 12 years ago when they devised the MPF (it was they who concocted the rules, not the government, don't fool yourself). They immediately slammed the door on this escape route. It is that you should be able to choose your own manager for your MPF portfolio. You would then be able to demand and get full fee disclosure and there would be real competition in this business.