Employee Choice Arrangement moves accrued savings only: new money stays in the old account

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

Under three months before the November 2012 Employee Choice Arrangement (“semi-free choice”), workers got one chance a year to move past employee contributions to a new MPF administrator — while each month’s new contributions still flowed into the employer-designated original account. The MPFA explained the scheme aimed to boost competition and cut fees, without burdening employers’ administration.

How did transfers work?

After applying, the old and new trustees verified details and redeemed funds, then issued confirmation and settlement statements — about six to eight weeks all in. Even after past employee contributions moved, each month’s new employee contributions still landed in the original account.

The MPFA’s view

The MPFA’s executive director (supervision) explained the arrangement would push workers to manage MPF accounts actively and, through competition, lower fees — but monthly contribution routing couldn’t change, to spare employers admin load.

She warned workers not to “switch for switching’s sake or rush into change”: weigh fund choice, fees, trustee service and personal needs, and mind the “gap period” that could bring investment losses; but she encouraged consolidating personal accounts.

What support was in place?

• An MPFA senior manager noted one in ten employees switched immediately under Australia’s similar scheme; the authority was studying a trustee e-platform for data handoffs.
• Guidelines required original trustees to process applications within 30 days, and to notify within 10 days if information was incomplete.
• The hotline 2918 0102 expanded to 200 lines.