A playbook for MPF semi-portability: know yourself, know the market, don’t switch blindly

This article is a rewrite of a report from June 2012.

Q: Newspapers keep mentioning MPF “semi-portability”, supposedly launching at end-2012. As a contributing member, what should I watch for? Does not switching mean losing out?

A: No. A senior AIA pensions executive said that under the Employee Choice Arrangement, staying put was not losing out — the key was to “know yourself” and “know the market”, and never switch for switching’s sake.

What is the Employee Choice Arrangement?

In short, members gain real power to choose their preferred MPF schemes: employees could move the employee-mandatory portion of their current-employment account to a chosen scheme once per calendar year in one lump sum, and could also move all previously accrued mandatory contributions from existing accounts at any time.

But an AIA “ideal retirement” survey earlier that year found only 26 per cent of respondents had heard of and understood the arrangement, while 74 per cent did not understand it or had never heard of it — most working people simply didn’t grasp what it was.

How should members prepare?

Step one, “know yourself”: understand your risk tolerance, investment preferences, and non-retirement savings or investments — and review your current provider’s service, fees, fund choice and performance.

Step two, “know the market”: research other providers’ service, fees, fund choice and performance for comparison.

The crucial reminder: assess the whole picture, not just management fees. Expense ratios, fund choice, performance and platform usability all determined whether every dollar contributed would carry members toward a fulfilling retirement. Doing the homework early meant knowing how to choose when the scheme went live.