An orange and white booklet fell into your correspondent's lap the other day. Entitled Principal Brochure, it comes from HSBC Mandatory Provident Fund and it bills itself as 'You, us [sic] and Hong Kong. We're in this together.'
Unfortunately we are. It is not unfortunate for HSBC, however, as you will quickly realise if you page through a few paragraphs of this brochure. Here are some of the relevant fees and charges that The Bank reserves the right to slap on you if you are in its MPF schemes:
Investment management fees - up to 2.5 per cent annually of the net asset value of each of MPF constituent fund. An equivalent well run pension fund in the private sector (this is really public sector) can do the job for less than a fifth of that.
Bid-offer spread - up to 7.5 per cent on the issue price on all purchases of units including initial purchases and switching between constituent funds. Many private sector funds let you switch free if you do not do it too often and certainly do not charge anywhere near that much.
Trustee, custodian and administration fees - up to 4 per cent annually of each constituent fund. Less than a quarter of that would cover the real cost.
Contribution charge - up to 7.5 per cent of almost all incoming contributions to MPF schemes, 15 per cent if made more frequently than monthly. More than monthly means more administrative headaches, you see. Note, however, that this produces no headache when HSBC is the beneficiary. Fees, charges and expenses accrue on a daily basis.
Other fees, charges and expenses - Practically every other cost HSBC incurs including fees for audits, sub-custodians, transactions, valuations, printing, set-up costs and fees assessed by regulatory authorities. It says it will not charge you selling costs except, that is, if it deems the costs wholly attributable to you, a loophole through which you can stick a battleship's guns. And here is the real lulu. One of the constituent funds is called the Guaranteed Fund on which the minimum return will be set yearly.
