An MPF comparison checklist for the employee choice era

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

Under the MPF system as it stood in 2012, employers chose the trustee; employees could only pick constituent funds within that scheme — even if fees were high or performance poor. The employee choice arrangement, nicknamed MPF “semi-portability” and expected in November 2012, was set to widen that freedom: once a year, employees could sweep their mandatory contributions into a personal account with a scheme of their choice. Trustees were expected to cut fees to compete — and with 19 trustees in the market, an MPF comparison was essential homework before switching.

What should an MPF comparison cover?

Look beyond fees. A trustee should be judged on fund information and performance, fund-switching turnaround, the annual fund fact sheet and benefit statement, online services, charges, customer service quality — plus financial strength, business direction and responsiveness to market needs. Fees and returns matter, but dealing details and switching times also shape your retirement savings.

How do you read a fund expense ratio?

The fund expense ratio (FER) is the cleanest cost comparison: total fund expenses as a percentage of fund assets. Expenses typically cover the management fee plus operating costs such as custody and audit fees — and most charges are already reflected in the fund price, so comparing FERs means comparing true investment costs. Weigh performance, risk and relative FER together when choosing funds.

How should fund choice change with life stages?

Your mix should evolve with your life. Younger employees can take a more aggressive mix to chase higher returns; those nearing retirement should favour lower-risk capital-preservation or guaranteed funds. Review regularly — adjusting for life changes, market conditions and your risk tolerance — to grow retirement savings within risks you can bear.

What about old preserved accounts?

If past job changes left preserved accounts scattered — or you cannot remember which trustees hold them — the MPFA can tell you what sits under your name. Consolidating preserved-account benefits into a single account makes management easier and can cut costs. MPF is long-term investing for life after work; a professional adviser can help if you are unsure.