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Hong Kong’s eMPF seen to slash administration fees by 55%

MPF
By Hui Ching-hoo   
September 28, 2022

Hong Kong’s Mandatory Provident Fund administration fees will be slashed by as much as 55% once the centralised digital platform is operational, according to Ayesha Macpherson Lau, chairman of Mandatory Provident Fund Schemes Authority, the government entity that supervises the MPF industry.

Construction of the eMPF platform began in 2020 and is scheduled to be completed by the end of this year at the earliest. It’s expected to become fully operational in early 2025.

Lau says lower fees are a top priority for the MPFA, and that the fund expense ratio or FER has dropped from 2.1% in 2007 to the current 1.37%, thanks to its joint efforts with the MPF industry.

Noting that administration fees account for the largest share of the FER at over 40%, she expects it to decline when the administration process of some 450 MPF funds are streamlined under the eMPF.

“Regarding administration fees, the eMPF Platform, which the MPFA is currently constructing at full steam, will standardise, streamline and automate the administration processes, aiming for as much as a 55% reduction in the administration fees of MPF funds,” Lau writes in a blog post published on the MPFA website on September 25. “As for other fees, the MPFA will continue to enhance the transparency of the MPF to foster market competition, leading to fee reductions.”

Investment management fees represent the second largest share of the FER at over 33%. Lau called on MPF trustees to report on their schemes to members to help them understand whether their fund choice offers value for money.

Starting from the second quarter of next year, the 13 trustees will have to submit investment governance reports to the MPFA and also upload them to their websites.

The MPF, Hong Kong’s largest retirement scheme, had HK$1.06 trillion (US$135.8 billion) of total assets and over 4.5 million members as of June 2022.