Employee Choice Arrangement: four essential tools for choosing an MPF scheme

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

As the Employee Choice Arrangement neared, the government was also legislating tighter regulation of MPF intermediaries. Previously employees passively accepted employer-chosen trustees; after “semi-free choice”, steady job-holders benefited most — current contributions could move without waiting for a job change. An HSBC Insurance executive wrote then on four tools for comparing schemes yourself, instead of relying on agents’ word.

Tool 1: the scheme brochure

Every trustee provides a free Principal Brochure or Offering Document, downloadable or by hotline. Compare: fund managers, objectives, types, features and count; management and other fees; default fund settings; guaranteed-fund terms; and key parties — trustee, custodian, administrator.

Tool 2: the fund fact sheet

Trustees must issue fund fact sheets at least twice a year; many publish quarterly online. Focus on: past performance (funds under six months old show none), risk indicator (higher means riskier), index-fund tracking versus the index, fund expense ratios, and guaranteed-fund return data.

Tool 3: the on-going cost illustration

Found in trustees’ booklets. It works an example: contribute HK$1,000 at each year’s start, assume 5% annual return, invest one/three/five years — then shows total charges based on the past financial year’s expense ratio. Line up illustrations from different trustees and fee differences jump out.

Tool 4: the annual benefit statement

The yearly statement lists account balance, fund holdings, contribution records and any employer arrears. This one is the most practical: when an agent claims a new scheme is cheaper, check the statement for “fund unit rebates” — most trustees discount active members this way; or ask the employer or trustee directly to confirm the current scheme’s real fees, so no agent misleads you into a pricier plan.

The statement’s scheme name, employer number and member number are also required for transfer forms — errors cause delays.