The Mandatory Provident Fund (MPF) will cost more to administer than the occupational retirement scheme (Orso) because of the additional regulations it will require, the MPF Office says. The revelation yesterday angered some legislative councillors who said the Government was favouring a pension scheme that benefited fund managers at the expense of the scheme's members. They also said the estimates called into question claims the fees would be reduced through economies of scale. During a Legco sub-committee meeting, the MPF Office said scheme members would face annual fees of 1.6-2.4 per cent of fund assets, slightly higher than the Orso scheme, which has annual fees of 1.5-2 per cent. The cost of operating the MPF will be between 0.5 and 1 per cent, while the investment charges will be about 1 per cent, on par with the Orso scheme. MPF scheme members will pay 0.03 per cent of total assets towards the compensation levy, 0.2 per cent to the MPF Authority, 0.15 per cent for professional indemnity insurance and 0.06 per cent on additional unspecified fees. Legislator Chan Yuen-han said: 'The Orso scheme has only 800,000 members but the MPF is expected to have more than two million members. Economies of scale should reduce costs.' MPF Office director Pamela Tan Kim Mi-wah said the additional requirements of the MPF scheme would offset the effect of economies of scale, but she was confident competition would eventually bring costs down. 'Due to its mandatory nature, the MPF will require more extensive regulation, which means the cost will be 6-8 per cent more than the Orso scheme,' she said. 'The companies covered by the MPF are smaller than those in the Orso scheme and this will also push costs up.' Legislators demanded the Government set a cap on annual fees but Mrs Tan said the fees were determined by commercial factors and should not be set by the Government. The MPF Office estimated the MPF Authority would incur annual expenses of $300 million to $350 million and said the 0.2 per cent levy for the authority was insufficient to cover costs.