Beware the “timing risk” in MPF transfers: a six-to-eight-week gap can mean buy-high-sell-low

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

The “semi-free choice” Employee Choice Arrangement arrived on 1 November 2012, letting workers pick among 19 trustees and move accrued benefits from current employee contributions once a year. The biggest trap in an MPF transfer wasn’t fees — transfers were free — but the six-to-eight-week “timing risk”.

What is timing risk?

You can’t control the dealing clock. From application to confirmation took six to eight weeks: the original trustee selling holdings, cash changing hands, the new trustee buying in. Employees couldn’t time the sell or the buy — risking selling low and buying high, a losing trade — especially with volatile equity funds.

How to reduce the risk?

Two tactics. A wealth management executive advised:

1. Park in a money market fund first: choose the new trustee’s money market fund on arrival, then switch internally to the favoured fund once settled; internal switches take days, slashing uncertainty.
2. Move in quiet markets: summer, when fund managers trade lightly and markets lack direction, suited transfers better.

Transfer rules at a glance

An MPFA spokesperson stressed the arrangement was a new right, not a duty — act from your own needs. Know your goals, assess current and candidate trustees on returns, fees and service with long-term performance in mind: that was the rational approach.