Employee Choice Arrangement: opening up MPF, members are the winners

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

The Employee Choice Arrangement (“MPF semi-free choice”) took effect on 1 November 2012. Between the Legislative Council passing the amendments in 2009 and implementation, the MPFA and industry prepared intensively: administrative and technical support, industry consultation, education campaigns, tighter conduct rules for intermediaries — all to protect members’ interests and widen their choice.

What did open competition bring?

The customer base shifted from 200,000-plus employers to 2.3 million members. Under competitive pressure, providers would upgrade products and service quality, offer more fund choices and fee adjustments, and nudge members to manage MPF investments more actively — good news for every member.

Should you switch the moment it launches?

No — and don’t follow the herd. Under the new scheme, workers could choose the provider and plan that suited them and move accrued benefits from current employee mandatory contributions to the new plan; each period’s new contributions were unaffected and stayed with the company’s scheme.

But don’t rush to “switch teams” on day one or copy others’ picks. Retirement planning is personal: ideal lifestyles and expected retirement sums differ. Before deciding, compare schemes’ merits, weigh your goals and needs, and choose deliberately.

Is MPF alone enough for retirement?

No — diversify. Ideal retirement planning takes a full toolkit: savings, insurance/medical plans, other personal investments; MPF is long-term investing and mandatory for every eligible worker — the cornerstone of the retirement plan. Start by paying attention to your MPF, and prepare for the retirement you want.