Employee Choice Arrangement slated for 2012: intermediary registration first, with lower MPF fees in sight

In December 2011, the government announced plans to launch the Employee Choice Arrangement — MPF “semi-portability” — by the end of 2012, letting employees choose their own MPF scheme. First, legislation would create an MPF intermediary regulatory regime, with the MPFA as the registration authority. A key part of the official case at the time: besides better protection for contributors, the reform was expected to bring MPF fees down — high fees being the MPF system’s most criticised flaw for years.

Why was the Employee Choice Arrangement seen as a chance to cut MPF fees?

The government planned to launch the Employee Choice Arrangement by end-2012, letting employees choose their own MPF scheme; legislation would first set up an intermediary registration regime run by the MPFA — which would write the rules and handle discipline — with existing registered intermediaries transitioning automatically within two years, expected to strengthen contributor protection and, through competition, lower MPF fees.

The logic was straightforward: once employees could vote with their feet and move their contributions, trustees could no longer rely on captive employer relationships and would have to compete on fees and service. That is also why intermediary regulation was made a precondition — as sales activity grew, promotion had to fall under the MPFA’s disciplinary oversight. The bill was gazetted that Friday and put to the Legislative Council the following week, with implementation targeted for November 2012 at the earliest.