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MPFA welcomes MPF trustee cuts management fees

The Mandatory Provident Fund Schemes Authority (MPFA) welcomes another round of management fee reductions by a Mandatory Provident Fund (MPF) service provider, which benefits millions of MPF account holders.
The MPFA closely supervises MPF trustees and requires them to establish a good governance framework to provide MPF scheme members with products and services that offer value for money. The trustees should, for example, have a mechanism to regularly review the Fund Expense Ratio (FER) of their funds and initiate plans to achieve higher cost efficiency from time to time.
An MPFA spokesperson said, “The MPFA has always been concerned about the level of MPF fund fees. It has repeatedly urged the MPF industry to reduce fund fees and taken a number of measures to make room for fee reductions. These measures include enhancing and standardizing fee disclosure, implementing the Employee Choice Arrangement, streamlining and simplifying administrative processes, requesting trustees to offer low fee funds as well as merge less efficient schemes and funds.
As the MPFA expected, the Default Investment Strategy (DIS), launched this April, would have a benchmark effect on the market. With the fees of the DIS funds capped, their introduction has put pressure on other MPF funds to reduce fees as well. From the passage of the DIS legislation in May 2016 to end October 2017, 63 MPF funds had cut their fees, with the biggest reduction up to 54.55%.
The average FER of MPF funds had gone down from 2.1% as at the end of December 2007 to 1.55% as at end October 2017, representing a 26% reduction. We expect the FER to drop further with this round of fee reductions.
The MPFA expects other MPF service providers to follow suit and reduce the fees of MPF funds to benefit more scheme members.

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16 November 2017


Last Review Date: 16/11/2017