Every time we receive the half-yearly financial statement of our Mandatory Provident Fund (MPF) scheme, we do not need a calculator to see how notoriously bad our MPF investments fare and how intolerable some can get. Last week a study by the Consumer Council on the performance of 523 MPF funds over the past five years has once again added more oil to the fire and incurred our wrath to a tipping point.

The survey showed the astounding picture that nearly half of the funds ended up in the red on average every year, with the poorest performing one losing up to an average of 14 percent. The finest performance recorded is one with only an average annual gain of 5.8 percent. However, due to the outrageously high management fees that can be as much as 4.62 percent at an average of 1.74 percent, the small gains fail to make up for a large chunk of our retirement savings nibbled away by fund managers. Despite the appalling performance, MPF trustees and fund managers are guaranteed to pocket a total of HK$7 billion a year in management fees, while our funds continue to dwindle.

It is indisputable that it would be better if we just put our retirement money into fixed deposits. At least we would not let those management fees bite heavily into our MPF returns to make us feel that a large amount of our hard-earned money was flushed down the toilet. When compared with Britain's 1.19 percent, Australia's 1.21 percent, Singapore's 1.41 percent and even Chile's 0.56 percent, the low return rate of Hong Kong's MPF funds and its high management fees easily explain all the despair and simmering discontent among the city's employees.

In fact, a financial institute estimated that our retirement funds can now only sustain a person's living for not more than five years, compared with 6.7 years revealed by a similar survey two years ago. Given Hongkongers' high life expectancy, how they are to cope with their remaining years is a grave question. It is ridiculous that instead of accumulating savings and providing retirement protection for local employees, as intended by the scheme, the MPF scheme is actually offering generous wage protection to fund managers, sufficient to turn them into highly-paid fat cats, in spite of their poor performances.

This is not the first time for the public to cry out against the scheme's problems and loopholes. Despite the lapse of 12 years and the mounting calls for reform, the MPF Scheme Authority still seems to turn a blind eye to a notable litany of sins and fails to come up with a solution to this heart-rending problem. On the contrary, the authority keeps demanding a raise in the MPF income cap from HK$20,000 to HK$25,000 or even more. It would be like putting a cart before the horse. No matter how much more money we put into our MPF accounts, if our fund managers continue to lose our money like that and charge higher fees, the whole scheme will become futile.

With the Employee Choice Arrangement taking effect next month to allow employees to choose a fund manager for their half share of the contributions, some may expect this "portability" will push down management fees, as a result of greater market competition. However, there are as many as 39 MPF schemes and more than 500 funds. Without comprehensive information for us to compare the performances and charges of different MPF schemes, how can we make an informed choice among the eye-dazzling or otherwise misleading data?

It should have been the responsibility of the authority to provide us the updated and user-friendly information from time to time. It is ironic that this work was undertaken by the Consumer Council instead. What has the authority done all these years instead of squeezing more contributions from us to justify its existence?

In addition, for those who switch jobs frequently, because of such complex procedures required to transfer their MPF account to a new fund trustee, many employees are already deterred from changing their accounts. Without simplifying the procedures, this new arrangement will only increase the administrative hurdles for employees wishing to change their service providers, and thus discourage them from making their own choices. Whether the new arrangement will achieve the desirable result depends largely on the transparency of information and administrative efficiency.

The authority has proposed introducing a cap on management fees by legislation to counter the problem. We all know that in a free market economy, this suggestion is impractical and next to impossible. To kill this existing rip-off, one option is to hand over the fund to the Monetary Authority for management and investment, or set up a centralized MPF system like that in Singapore. Another option is to overhaul the MPF scheme allowing employees the full choice of manager for the entire contributions made on their behalf, with a broader choice of investment schemes or products. This will cut all the red tape for changing accounts and enable employees to demand and get full disclosure of their accounts.

The author is a current affairs commentator.

(HK Edition 10/26/2012 page3)