Employee Choice Arrangement: MPF “semi-portability” expected in second-half 2012

On 28 October 2011, Secretary for Financial Services and the Treasury Chan Ka-keung told the Legislative Council that employee-choice portability of MPF employee contributions was expected in the second half of 2012. For workers, it was the first real chance in the scheme’s 11-year history to “vote with their feet” — moving the accrued benefits from their own contributions into a scheme of their choice.

What is the Employee Choice Arrangement?

The Employee Choice Arrangement (dubbed MPF “semi-portability”) lets employees transfer the accrued benefits derived from their own contributions in a contribution account to an MPF scheme of their choosing, breaking the lock-in to the employer’s chosen scheme; in October 2011 the government expected implementation in the second half of 2012. To pave the way, the government was finalising a bill to regulate MPF intermediaries, expected before LegCo in December 2011 to strengthen member protection; if passed within the current LegCo term, the MPFA could implement the arrangement in the second half of 2012.

What has to happen before launch?

1. November 2011: the government puts to LegCo’s Financial Affairs Panel a proposal for an automatic levy-adjustment mechanism for the MPF compensation fund, helping to lower the average fund expense ratio.
2. December 2011: the MPF intermediaries regulation bill goes to LegCo.
3. Second half of 2012: once the bill is passed, the MPFA implements the Employee Choice Arrangement.

What does it actually mean for employees?

“Semi” is the operative word: only the employee-contribution portion becomes portable, while employer contributions stay put. Even so, the shift matters — trustees that want to keep clients will have to compete on fees and performance, which is exactly the fee-cutting mechanism the government was counting on. The government also said it would stay in close contact with the MPFA on further reviews, including groundwork for eventual full portability and for phased or early withdrawal in specified circumstances. For how to compare schemes before switching, see the MPF education hub.