Getting the most out of your MPF? New platform allows easy ranking of fund returns and fees
- The ‘MPF Fund Platform’ tracks performance and fees for all 429 funds
The Mandatory Provident Funds Schemes Authority has introduced a platform to help local savers easily assess how their retirements savings plans are performing relative to other funds on offer.
“By launching the new platform, employees can easily check if their MPF investment funds are charging fees which represent value for money. If not, they should switch to other funds to add pressure on their providers to cut fees and enhance performance,” said Cheng Yan-chee, chief corporate affairs officer and executive director of MPFA.
The bottom 10 performers, including Japan equity fund and some bond funds, suffered an annual loss of between 0.21 per cent to 2.02 per cent since launch through March 31. Fees for these funds ranged between 1.26 per cent to 2.02 per cent.
The MPF funds on average charged an annual fee of 1.52 per cent.
In contrast, the top 10 performing funds were all equity focused and have produced annual returns over 10 per cent since their launch until March 31. Annual fees for these funds ranged from 0.84 per cent to 1.77 per cent.
“The MPFA will also check if the providers in the following months have charged a reasonable fee and may urge them to make improvements,” he said.
Lower fees over the long term could have a dramatic impact on an individual’s retirement savings, Cheng said.
If two employees each pay HK$1,500 per month to two different investment funds for 40 years, each with an annual return of 5 per cent per year, the fund which collects an annual management fee of 0.5 per cent will see net value of HK$2.102 million, while a fund charging an annual 1.5 per cent fee will have a net value of only HK$1.567 million – a gap of HK$535,000.
“This shows the importance of keeping management fees at a reasonable level,” Cheng said.
Alfred Yip, head of pensions of HSBC Hong Kong said the bank continues to review its fee structure and services.
“HSBC MPF understands that members always want the most value out of their MPF savings,” Yip said. “We have proactively lowered the fees of two funds effective July 1, 2019. It is the seventh time we lowered the management fees of our funds since the launch of MPF. We believe as the scale of the MPF assets grow, there will be more room for not only us but all MPF providers to cut their fees and bring more value to MPF members,” Yip added.
Elvin Yu, chief executive of pension consultancy firm Goji Consulting, said the platform is a good tool for employees to check if their MPF provider is offering value for money.
He added that a fee reduction would need leverage from “many employees to decide to shift their providers”.
The MPF, launched in 2000, is a compulsory retirement scheme. Employers and employees are each required to contribute 5 per cent each of an employee’s monthly salary to the MPF, capped at HK$1,500 per month. The contribution and investment returns can be drawn down from age 65.
