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Enoch Yiu

HSBC, StanChart to lower pension costs

HSBC, Hang Seng Bank and Standard Chartered Bank say they will consider falling into line with rival Mandatory Provident Fund providers which have cut fees for their most conservative investment option.

An HSBC source said the bank had decided to cut the fees of capital preservation funds (CPFs) but had not decided by how much or when the cut would take effect.

Hang Seng Bank will do whatever its parent does.

Spokesmen for both banks confirmed they were in the process of reviewing the fee structure of MPF plans but gave no details.

HSBC and Hang Seng Bank have more than 30 per cent of the MPF market, making them the biggest provider. They charge annual fees of 1.95 per cent, much more than the revised fees competitors are levying.

A spokesman for Standard Chartered Bank confirmed the bank was considering a fee cut, but he could not give details. The bank levies a fee of 1.675 per cent on its CPF.

AIA-JF, the third-largest MPF provider, cut the fee for its CPF from 1.74 per cent to 1.25 per cent from September 1. Peter Crewe, chief executive of American International Assurance (Trustee), said the cut would save employees paying in the maximum HK$1,000 a month a total of HK$22,836 over 20 years.

Bank Consortium Trust, the fifth-largest MPF provider, cut its CPF fee from 1.5 per cent to 1.2 per cent the same day. Manulife International, the second-largest MPF provider, has also said it will cut its CPF fees.

BOCI-Prudential, the fourth-largest provider, said it saw no need to cut its CPF fee. It said it had charged a fee of 0.8 per cent on its CPF since the mandatory pensions scheme began in 2000 and was still charging the lowest CPF fee.

CPFs offer the least risk - and the lowest returns - of all MPF products and require the least management. Investors' funds are placed in bank term deposits.

The fee reductions by AIA-JF and Bank Consortium Trust were the first since the MPF was launched and employees and employers were required to contribute 5 per cent of salaries up to a ceiling of HK$1,000 a month. The cuts will benefit about 600,000 investors.

The pension fund regulator and the Consumer Council welcomed the prospect of more MPF providers cutting CPF fees  but urged them to consider cutting fees for other types of pension fund.

Consumer Council chief executive Connie Lau Yin-hing said it was 'good news' that providers had taken a first step towards cutting their fees.

According to the Mandatory Provident Fund Schemes Authority, 12 per cent of the HK$229 billion in MPF assets under management at the end of June were invested in CPFs.

The authority said 52 per cent of total MPF assets were in balanced funds, which invest in a combination of stocks and bonds, 24 per cent were in stock funds, 10 per cent in guaranteed funds, and the other 2 per cent in bond and money market funds.

Ms Lau said: 'The cut in fees for CPFs should only be a first step. The majority of employees will not benefit unless the fees for stock market funds and balanced funds are also reduced.'



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HSBC

More MPF providers weigh cuts  in fees