MPFA Blog – MPFA continues to drive fee reduction

The Mandatory Provident Fund Schemes Authority (MPFA) has published a blog recently written by MPFA Chairman Mrs. Ayesha Macpherson Lau as regards fees in mandatory provident funds (MPFs) and future expectations in this context. In it, the Chairman emphasizes that the MPFA has successfully driven a significant reduction in fees over the past one and a half decades, with the average fund expense ratio (FER) decreasing from 2.1% in 2007 to 1.35% as of September this year, representing a 36% reduction. In this context, Mrs. Lau also noted the fact that 30% of MPF funds now possess a FER lower than 1%, reflecting substantial fee reductions over the years. The decrease is largely attributable to the introduction of the MPF Fund Platform in 2019, allowing a breakdown of all MPF-related fees, including administration, investment management, and sponsor fees. This transparency not only empowers scheme members to make informed fund choices, but also facilitates the MPFA’s efforts in driving fee reduction in a more focused and sustained manner.
The upcoming eMPF platform, which is currently under development, has a primary objective of reducing administration fees even further. Within the initial two years following its implementation, an average reduction of 30% in administration fees payable by scheme members is anticipated. Over a 10-year period, the project is estimated to yield cumulative administration cost savings ranging from $30 billion to $40 billion, equivalent to 41% to 55% of the original administration fees during that period.
Beyond administration fees, other components such as investment management and sponsor fees are also under review, with the MPFA requesting trustees to submit a five-year fee reduction strategic plan.
Mrs. Lau concludes her blog by noting that while fee levels are significant, fund performance remains a critical factor when selecting MPF funds. For those with limited time or investment expertise, the „default investment strategy (DIS)“ provides a solution, with fee caps set at 0.75% for management fees and 0.2% for recurrent out-of-pocket expenses, further decreasing to 0.1% with the introduction of the new eMPF platform.