Mandatory Provident Fund fee cuts at HSBC to spark reductions in city and increase savings

HSBC, the largest bank in Hong Kong, will cut the management fees charged for its Mandatory Provident Fund schemes from December 1, with the fees for some constituent funds set to fall by 27 per cent.

The reduction is the largest ever in terms of assets covered and is expected to trigger a new round of fee cuts in the city’s compulsory pension scheme, which covers 2.8 million people and has US$100 billion in pension assets under management. It is likely to lead to more savings for Hong Kong’s working population.

“The Mandatory Provident Fund is a key pillar that supports the retirement life of Hong Kong’s working population. With an increase in the fund balance for each scheme member, proper management of accounts can effectively increase savings for an ideal retirement life. Being one of the largest such fund providers in Hong Kong, HSBC is committed to meeting the retirement needs of our members,” Alfred Yip, the head of pensions at HSBC Hong Kong, said on Thursday.

The bank has two schemes with 25 funds and it will lower the management fees of 10 constituent funds, with reductions ranging from 4 per cent to a maximum of 27 per cent. The cuts will benefit about 1.5 million accounts.

“This is the sixth time since 2007 that we have reduced the management fees of selected constituent funds under the HSBC Mandatory Provident Fund schemes, benefiting about 1.5 million accounts,” said Yip.

“We expect greater room for further reduction in this average value.”

After reduction, some of the funds will be charged at the lowest management fee of 0.75 per cent, which is the fee cap for default investment funds, formerly called core funds.