Employee Choice Arrangement: which of your three MPF accounts can move?

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

Twelve years into the MPF, 2012 brought unusual change: the contribution income cap rose to HK$25,000 and the Employee Choice Arrangement launched on November 1. A Fidelity survey found 35% of respondents wanted a new provider — but over 70% did not understand the details. So: how many accounts do you have, and which can move?

How many MPF accounts does a worker have?

Basically three: the current employer’s mandatory contribution account, the employee’s own current-employment mandatory account, and accounts from previous jobs.

Which can move under the arrangement?

The first stays with the employer’s chosen scheme; the second can be moved once a year — the year’s accrued benefits transferred in full to a trustee and scheme of the employee’s choice. In short: contribute through the employer’s scheme during the year, then shift the whole employee portion elsewhere at year-end. Each move must be all-or-nothing, once a year, with no carry-over of unused chances.

How should you prepare?

Know your own accounts’ performance, then compare schemes. MPFA statistics to March 2012 showed mixed-asset, equity, guaranteed, bond and money-market funds had all beaten inflation annualised since 2000 (the conservative fund excepted). Hong Kong equity funds were the most popular: the best delivered over 20% cumulative five-year returns, beating the Tracker Fund’s 4.5%, while the laggards lost 12%. The arrangement lets you move toward better-fitting, better-performing schemes.