The government's effort to reduce inflated Mandatory Provident Fund (MPF) fees has failed so far despite fund providers facing stiffer competition for clients from next year. HSBC and other MPF managers say they will offer more fund choices and improve services to encourage more people to switch when a new law from next year allows workers to choose their own pension provider. But these providers are not cutting fees to attract clients, disappointing the government which wants to see cheaper options for employees as part of the change. Under the new law, 2.3 million employees in the city from next year will be allowed to chose which MPF provider handles their part of their pension contributions. At present employee and employer pension contributions are decided by the boss. A survey by the Hong Kong Investment Funds Association showed 31 per cent of employees intended to change their MPF providers when allowed to do so. People contribute 5 per cent of their salary to the MPF, which is matched by an employer contribution of 5 per cent, up to a combined HK$2,000 per month. Employees can also allocate contributions among different fund choices in the scheme. Former Mandatory Provident Fund Schemes Authority chairman Henry Fan Hung-ling proposed the change in a bid to introduce more competition to the industry and force the 19 MPF providers to cut their fees. At present, the 300 MPF investment funds charge annual fees ranging from 0.88 per cent to about 3.2 per cent of the assets, depending on the nature of the funds. Providers in the 10-year-old scheme have been under fire for what are seen as highly inflated charges. The Consumer Council in 2007 said a 3 per cent fee could eat up 52 per cent of retirement benefits over 40 years, assuming a 5 per cent annual return and HK$2,000 invested each month. After the criticism, some providers have cut fees on simple investment funds but there were no wide scale reductions across the industry. 'I do not think employees focus on fees as they care more about the performance of MPF investment funds,' said Jason Sadler, the managing director of Hong Kong insurance business at HSBC. HSBC, the largest MPF provider with a market share of 32.5 per cent of pension assets, took the lead in launching four new funds last October to prepare for the new change. This is on top of the 10 existing fund choices. The four new funds invest in Chinese equities, flexi-managed funds, global bond funds and stable funds. Sadler said this worked well and employees were contributing additional money or switching from other funds to these four new funds. Among the new offerings, the Chinese equities funds are the most popular. Sadler said besides launching more fund choices, HSBC had also increased its services quality and information provided for the customers. 'I believe we should compete with service quality and fund performance,' he added. Sadler said HSBC would provide more services and information at branches for MPF clients in the coming year. 'I believe in banassurance. We will use our branch network to sell MPF, life insurance, travel insurance and other insurance products,' Sadler said. Other MPF providers are also expanding their fund choices and services, but not cutting fees. RCM Asia Pacific chief executive Mark Konyn said MPF providers are looking at a number of enhancements to their services in anticipation of the increase in choice. RCM is part of the Allianz group. 'Fund managers are focused on ensuring that any potential products gaps are filled with the potential launch of new funds,' Konyn said. 'At RCM we have focused on the launch of new funds and on extending our relationships with third-party schemes where a number are adding our funds to their product line-up. We have also been working with clients to understand their concerns and challenges ahead of the introduction,' he said. Bank of East Asia will also offer clients increased fund choices, said Patrick Li, the head of MPF business at the bank. 'This is aimed at increasing the investment options for scheme members,' Li said, added the lender had added four investment funds to its MPF scheme in January. MPF customers will also receive more award programmes and banking privileges, he added. Like HSBC, Bank of East Asia is also planning to use its extensive branch network and internet banking platform to serve pension clients.