MPF Scheme Fees and Charges Comparison: Management Fees and Fund Expense Ratio(FER)

MPF Scheme Fees and Charges Comparison: Management Fees and Fund Expense Ratio(FER)

Considering that MPF is likely the lengthiest financial commitment that most Hong Kongers will make, it’s definitely worth finding out more about the complexities of MPF. That’s why we have prepared an MPF guide covering MPF scheme fees and charges to help you make sense of the MPF world.

MPF schemes shouldn’t be a foreign word to Hong Kongers: 5% of an employee’s salary goes to the MPF account every month, but most of them don’t know the exact assets you have because you might be too busy to manage their MPF account.

Hong Kong MPF Funds: The 5 Basic Types

5% seems like a small amount, but choosing the right type of MPF funds can make a huge difference in the long run.

To begin with, let’s get to know what are the 5 basic types of funds:

  1. MPF Conservative Fund
  2. Guaranteed Fund
  3. Bond Fund
  4. Mixed Asset Fund
  5. Equity Fund

MPF Conservative Fund

The MPF Conservative Fund, also known as the Money Market Fund, has the lowest risk among all MPF fund types. It’s assured to be the most secure investment, but you can’t expect huge returns from it.

You might not know that this fund has “zero charges” except the return rates in a particular month are higher than the MPFA’s Prescribed Savings Rate (PSR).

If not, that means if the funds are losing money, you don’t need to pay a fee. If you agree that security is king, MPF Conservative Funds will come up top.

Guaranteed Fund

The Guaranteed Fund, as the name suggests, offers guaranteed returns. Sounds great, right? Wait a minute, they’re only “guaranteed” under 2 conditions:

  1. If you have invested in the funds for a minimum investment period.
  2. If you only withdraw your MPF under specified conditions, such as a minimum number of contributions, a minimum holding period from the last contribution, the legal requirements for early withdrawal, etc.

If you fail to meet the qualifying conditions, the “guaranteed returns” aren’t guaranteed. So, don’t forget to check the specified requirements before making your move.

Note that the guarantor may change the guaranteed rate (usually with a notice 1-3 months in advance). In some cases, the guarantee may even be cancelled when the market situation becomes unsustainable for the returns. Also, credit risk or guarantor bankruptcy risk might still happen, so guaranteed funds don’t mean zero risk.

The fund charges a guarantee or reserve fee in addition to the basic MPF fund charges, so the fees are relatively higher than those of other MPF fund (1.29 – 3.33%). However, if you’re looking for a stable, guaranteed return and wouldn’t mind following the guarantee conditions, consider investing in guaranteed funds.

Bond Fund or Fixed Income Fund

As expressed by its name, bond funds earn a stable interest income through bond trading. Bonds included in the funds have met MPFA’s credit rating or listing standards. It has low-to-medium risks from bond market volatility.

Bond funds or fixed income funds are good for those looking for stable returns over a medium to long term with a low-risk appetite.

Mixed Assets Fund

Mixed Asset Funds invest in a combo of stocks and bonds to capture capital gains over time. This type of MPF fund carries a medium-to-high risk level.

One great thing about the Mixed Assets Fund is that it offers greater flexibility in portfolio options. You may make your own “cocktails” with various stocks and bonds that fit your risk appetite. But remember, a greater proportion of stocks comes with a higher risk.

Equity Fund

High rewards come with high risk. Looking for the most rewarding (and riskiest) MPF fund? Equity funds might be your choice. These funds seek to capture gains through stock appreciation in different markets.

Once again, equity funds are best suited for those with a longer investment horizon and a higher risk tolerance level, as they might experience an 8.71% loss in a year.

Hong Kong MPF Fees and Charges: the Difference between Fund Level and Member Level

Most MPF fund fees can be decomposed into 2 major categories: fund-level deduction and member-level deduction.

  • Fund-level deduction: the expenses are deducted from the net fund asset value and are usually expressed as the Fund Expense Ratio (FER).
  • Member-level deduction: MPF Funds fees are deducted from members’ accounts.

MPF Scheme Charges: Fund Level Deduction

All the incurred expenses charged under the fund-level deduction include 3 major types:

  • Funds Management Fees: fees incurred from the Sponsor, Trustee, Administrator, Custodian, and Investment Manager.
  • Other Fees and Expenses: fees incurred from annual audits, insurance, and other professional services.
  • Guarantee Fee: Guaranteed Funds pay this fee to the insurance institution for guaranteed returns in case of unsatisfactory performance.

You may see that these fund charges are generally expressed in the Fund Expense Ratio (FER).

MPF Scheme Charges: Member-level Deduction

Additional expenses under the member-level deduction are only charged when certain items are used. They include a participation fee, an annual fee, a contribution fee, a buy-sell spread, an equity withdrawal fee, and additional service charges.

Most of these fees are waived by the funds. However, it’s important to note that these fees aren’t shown on a breakdown of fees for different fund levels or a separate statement of the ratio of “other fees and costs.”

You’ll need to find the necessary information in the sales paperwork.

What Is the Fund Expense Ratio (FER)?

The Fund Expense Ratio (FER) is a handy tool when you need to compare the fees of different funds. FER is the expense ratio that reflects how much a mutual fund pays in expenses relative to the size of its assets.

The average FER is 1.33% among all 493 MPF funds, ranging from 0.11% to 3.33. You may check the MPFA MPF Fund Platform, where you can find information on the average, highest, and lowest fund expense ratios for all MPF funds.

Here’s an overview of all 5 types of MPF funds:

MPF Funds Financial Instruments Risks Returns FER Range Fees
MPF Conservative Fund Short-term bank deposits, and short-term bonds. The lowest The Lowest 0.11-0.72% Charges only when the returns exceed the monthly prescribed savings rate (PSR).
Guaranteed Fund Bonds, stocks or short-term money market instruments Relatively low Low 1.29-3.33% A guarantee or reserve fee in addition to the basic MPF fund charges
Bond Fund Bonds Low to Medium Low-to-Medium 0.78-1.82% a percentage of the fund’s net asset value
Mixed Asset Fund Stocks and bonds Medium to High Medium-to-High 0.59-1.92% a percentage of the fund’s net asset value
Equity Fund Stocks High High 0.62-2.14% a percentage of the fund’s net asset value

10 Lowest Fund Expense Ratio (FER) MPF Funds

According to the MPFA MPF Fund Platform Report as of 31st Dec 2022, here are the 10 Hong Kong MPF Funds that offer the lowest fund expense ratio:

Scheme Constituent Fund Latest Fund Expense Ratio (%) Net-of-fee 5-Year Cumulative Return
Fidelity Retirement Master Trust MPF Conservative Fund 0.11 1.36 
Sun Life MPF Basic Scheme Sun Life MPF Basic Scheme MPF  Sun Life MPF Basic Scheme MPF Conservative Portfolio 0.12 0.8
Sun Life MPF Comprehensive Scheme Sun Life MPF Comprehensive Scheme MPF Conservative Portfolio 0.12 0.72
Sun Life MPF Master Trust Schroder MPF Conservative Portfolio –

Ordinary Class

0.13 0.53
Sun Life MPF Master Trust Schroder MPF Conservative Portfolio –

Class B

0.13 0.7
My Choice Mandatory Provident Fund Scheme My Choice MPF Conservative Fund 0.17 1.54
AIA MPF – Prime Value Choice MPF Conservative Fund 0.18 3.06
BEA (MPF) Value Scheme  BEA MPF Conservative Fund 0.23 3.41
BEA (MPF) Master Trust Scheme BEA (MPF) Conservative Fund 0.25 2.87
BEA (MPF) Industry Scheme BEA (Industry Scheme) MPF Conservative Fund 0.26 3.22
SHKP MPF Employer Sponsored Scheme Invesco MPF Conservative Fund 0.26 3.57

All the funds mentioned above are the MPF Conservative Fund, which also has the lowest investment risk among other MPF funds.

Final Words: Remember to Check the MPF Fees

As the saying goes, a small number added up can make a difference, not to mention that MPF fees and expenses aren’t that small. To be smart, you should consider “fund fees” and “member fees” as key factors when you choose an MPF scheme.

Also, remember to properly keep your MPF letters and annual statements to avoid extra costs! As always, asking for advice from a financial advisor before making any investment decisions is recommended.

Frequently Asked Questions: MPF in Hong Kong

What is MPF?
MPF stands for Mandatory Provident Fund, which is a compulsory retirement savings scheme in Hong Kong. It requires both employers and employees to make regular contributions to a designated MPF account. The contributions are invested and accumulate over time, providing a source of retirement income for individuals.

How much should I contribute to my MPF account?

Both employers and employees are required to contribute 5% of the employee’s relevant income to the MPF account. The contributions are based on a maximum income level, which is currently set at HKD 30,000 per month. However, employees have the option to contribute more than the minimum required amount if they choose to do so.

Can I withdraw my MPF before retirement?

Under normal circumstances, you cannot withdraw your MPF before reaching the age of 65. The purpose of the MPF scheme is to provide retirement income. However, there are certain exceptional circumstances where early withdrawal is allowed, such as permanent departure from Hong Kong, total incapacity, or terminal illness. In such cases, you may be eligible to withdraw your MPF benefits earlier than the retirement age.

Can I choose my own MPF provider?

Yes, you have the freedom to choose your own MPF provider. There are various MPF providers in Hong Kong, and you can select the one that suits your needs and preferences. It’s important to compare the fees, investment options, customer service, and performance of different MPF providers before making a decision.

What happens to my MPF when I change jobs?

When you change jobs, your MPF account will remain with your current provider. You have the option to transfer your MPF account to your new employer’s chosen provider or to a personal account. If you choose to transfer your MPF account, you should inform your new employer and provide them with the necessary information. It’s important to keep track of your MPF contributions and ensure they are properly managed to maximize your retirement savings.

How much should I contribute to my MPF?

The amount you should contribute to your MPF depends on various factors such as your income, financial goals, and retirement plans. It is recommended to contribute the maximum allowed by law to maximize your retirement savings and enjoy the tax benefits associated with MPF contributions.

Related articles

Want to stay ahead of the crowd? Visit the MoneySmart blog for more financial tips!

MoneySmart—Your One-Stop Financial Products Platform