Employee Choice Arrangement: A Look Back at MPF’s “Semi-Portability” Milestones

After repeated delays, MPF’s “semi-portability” was finally slated in late 2011 for launch on 1 November 2012. Officially the Employee Choice Arrangement, the reform let employees choose their own MPF trustee for their own contribution portion — the biggest transfer of power in the system’s 11-year history: choice moved for the first time from employers’ hands to employees’.

What is the Employee Choice Arrangement?

The Employee Choice Arrangement (nicknamed MPF “semi-portability”) lets employees transfer, once per calendar year, the accrued benefits derived from their own contributions to a personal account with a trustee of their choice; the employer-contribution portion stays in the employer’s chosen scheme. It was originally due in April 2011 but deferred after the government realised MPF intermediaries needed stronger regulation first, pending passage of the Mandatory Provident Fund Schemes (Amendment) (No. 2) Bill 2011.

Why was it delayed again and again?

“Semi-portability” was supposed to launch in April 2011, then got shelved at the eleventh hour over an intermediary-regulation gap. Hong Kong had over 30,000 registered MPF intermediaries spread across banking, securities and insurance, overseen separately by the HKMA, the SFC and the Insurance Authority. The government decided to fix the rules first so investors would be better protected.

The post-reform setup:

Industry gears up: the fee-war prelude

With launch approaching, trustees had been cutting fees to win clients since early 2011: HSBC and Hang Seng led in March with cuts of up to 40% on three funds, followed by AIA, BOC-Prudential, Bank Consortium Trust and Fidelity. At a late-2011 MPF forum, Bank Consortium Trust’s CEO said economies of scale still left room for fee cuts; AIA’s senior vice president reminded members not to look at headline fees alone but to compare actual fund expense ratios (FER).

The industry also reassured members: the systems handling fund transfers were largely ready, and the MPFA was testing them regularly, so the launch shouldn’t bring chaos.

How should employees prepare?

Looking back, the real significance of “semi-portability” wasn’t switching itself — it forced the whole industry to treat employees as customers: more transparent fees, better service, wider fund choice. For today’s employees, comparing trustees’ fees and fund performance starts at mpf.hk’s fund browser — see what’s on the market before deciding where your MPF goes.