Employee Choice Arrangement: five questions on timing, risk and fees

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

Launching November 1, 2012, the Employee Choice Arrangement was the biggest MPF reform in 12 years. Here are the five questions members asked most.

Why “semi”-portability?

Because only the employee’s portion moves — the employer’s stays. The official name is the Employee Choice Arrangement: once a year (January 1 to December 31), members may keep or transfer the accrued benefits from their current-employment employee mandatory contributions to another provider. The employer portion cannot move — hence only “half”.

What are the transfer limits?

Once a year, all-or-nothing, to a single provider. If an account holds HK$100,000 (HK$50,000 each side), the full HK$50,000 employee portion must move together. Skip a year and the right lapses — no carry-over. Past-employment and self-employed balances face no annual limit and can move any time.

How long does a transfer take?

Typically six to eight weeks, much like porting a mobile number: the original trustee sells the fund units, moves the proceeds to the new trustee, which repurchases units per the member’s instructions.

Is transferring risky?

Yes — mainly the “investment gap”. Between encashment and repurchase, a volatile market can widen the exposure gap; dealing prices are forward-priced and unknowable in advance. Members cannot control the timing either.

Are there fees?

Providers charge nothing for the transfer itself, but watch bid-ask spreads and dealing costs — and compare the new scheme’s fees and total expense ratio, lest you move somewhere pricier for years.