Employee Choice Arrangement: MPF providers fight for employee contributions

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

2012 was a landmark year for MPF reform: the maximum income level for contributions rose to HK$25,000, and the Employee Choice Arrangement took effect on November 1. How would the industry change — and what would members gain?

What changed for member autonomy?

Employees gained one annual chance to move the accrued benefits from their own mandatory contributions in their current-employment account to any trustee and scheme. With the higher income cap, better-paid members were putting in HK$2,500 a month in total — no more excuses to ignore the account. The MPFA expected freely transferable assets to rise from 41% to 67% of the total.

How did providers compete?

The sales target shifted from employers to employees, and competition intensified overnight. Providers used to court employers, whose choice decided everyone’s provider; now the decision on the employee’s portion sat with the employee, turning millions of workers into a new customer base. With revenue tied to assets under management, winning transfers became the battleground — more attentive service, possible fee cuts, and members as the ultimate winners.

Why regulate intermediaries?

More competition meant more selling. The new legislation set up a statutory MPF intermediary regime to govern the coming wave of sales activity, so members would not be harmed by hard-sell tactics.