Employee Choice Arrangement: the 4 steps to move your MPF benefits

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

In the second half of 2012, Hong Kong’s “semi-portability” reform was about to give more than 2.5 million scheme members the right to choose their own MPF provider for the first time. The MPFA welcomed the milestone but urged members not to switch for switching’s sake — here is how the Employee Choice Arrangement worked.

What is the Employee Choice Arrangement?

The Employee Choice Arrangement, nicknamed “MPF semi-portability”, was a reform taking effect in the second half of 2012 that let employees move the accrued benefits from their own mandatory contributions in a current-employment contribution account to a trustee and scheme of their choice, once per calendar year. Employer contributions could not be transferred, and contribution administration stayed unchanged. Members were advised to compare trustees’ services, fund choices and fees before deciding.

How do the 4 transfer steps work?

The whole process took about six to eight weeks, and the member only needed to submit a form to the new trustee — the trustees handled the rest between themselves:

1. Open an MPF account with the chosen trustee (if not already held) and submit the “Employee Choice Arrangement — Transfer Election Form”.
2. The new trustee verifies the information and forwards it to the original trustee, taking about seven business days.
3. The original trustee redeems the fund units and mails a cheque to the new trustee, required by law to complete within 30 calendar days.
4. The new trustee allocates the money to the member’s chosen constituent funds within about ten business days.

Afterwards the member received a transfer statement from the old trustee and a transfer-in confirmation from the new one.

Why think twice before switching?

During the transfer, accrued benefits were sold and held as cash before being reinvested, creating an investment gap in which market movements could leave members selling low and buying high. Switching did not guarantee better returns either — members happy with their existing trustee and scheme could simply leave their benefits where they were.