Manulife has cut the management fee for all of its mandatory provident fund (MPF) portfolios under the Manulife Global Select and Manu-Lifestyle schemes. The firm says this is its way of helping alleviate the burden on MPF members of the current challenging conditions and to add value to their retirement benefits.

The last time Manulife and other MPF providers in Hong Kong cut fees in 2007, they did so because the business had grown large enough to allow them to compete in an environment with lower fees. Manulife says it had "solid business growth in the first quarter of 2009", with its provident funds business's total assets under management surpassing HK$50 billion ($6.25 billion) last month.

"At Manulife, we continuously review and enhance our MPF products and services with a view to providing the best offerings to meet members' changing needs," says Alan Merten, CEO at Manulife Provident Funds Trust." We hope that our initiative to reduce the management fee will add value to members' retirement benefits and help them see how important it is to continue preparing for retirement even in tough economic times." 

The new management fee will take effect from November 1, 2009, and will apply to all MPF funds under both the Manulife Global Select and Manu-Lifestyle schemes. The level of fee reduction depends on the fund chosen, but for most funds the reduction is 0.35% per annum of net asset value, with the highest reduction being 0.5% per annum. All Manulife MPF members, including members of Preserved Account and Flexi Retirement Contribution account can enjoy the new lower fees.

"MPF is a long-term investment for retirement," Merten says. "It is important that members start early to plan and save for their retirement, regularly review their own investment needs and risk appetite, and assess service providers on their all-round suitability including fund choice, investment performance, customer services, intermediary services and investment communications."

Manulife provides a diversified range of MPF funds for the Hong Kong workforce with 17 funds covering a spectrum of asset classes and geographies under the Manulife Global Select (MPF) Scheme and five funds under the Manu-Lifestyle scheme.

"Our intermediary services and continued service and product enhancements to address employers' and employees' needs have seen Manulife benefiting from a flight to quality in these difficult market conditions," noted Merten. "We had solid business growth in the first quarter of 2009, and our provident funds business's total assets under management surpassed HK$50 billion in June this year."

Back in 2007, MPF providers like Manulife, Fidelity, AIA/JF, HSBC, Bank Consortium Trust cut their MPF fees in varying degrees, as the economies of scale of the Hong Kong business allowed them to do so.

Launched in 2000, MPF is Hong Kong's first and so far only compulsory retirement programme, where both workers and employers contribute monthly up to 5% (or HK$1,000, whichever is lower) of the employee's salary to the fund. The low-risk options available for most retirement plans, including those offered for the MPF, have mainly involved between 20% to 30% exposure in equities. The majority of these funds are held in global fixed-income securities, a strategy that in previous years proved successful in delivering stable medium-term returns, but not without experiencing periods of sustained negative performance such as during the global financial crisis.