Beware “selling low, buying high” when switching MPF trustees

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

Era context: The original was brief, recording a warning from an MPFA senior manager at a seminar before semi-free choice launched. In 2012 the transfer process took six to eight weeks, leaving money in an “investment gap” — a technical detail the authority stressed repeatedly.

The MPFA’s liaison senior manager said that after the scheme’s launch, each calendar year employees could transfer their contribution portion once; both current and past employment portions could be moved within a calendar year. Once moved into a personal account, further transfers to trustees faced no frequency limit.

Why did switching risk “selling low, buying high”?

The transfer took six to eight weeks, during which the redeemed proceeds could not be invested in any fund, while fund prices could move in the interim — that timing gap could mean selling the old fund low and buying the new one high.

He advised employees to switch only after understanding all the details, citing Australia’s experience: about 10% of employees moved contributions in the early phase of a similar scheme there.