Full MPF portability: the 2011 Policy Address promised a study of the mechanics

Look back at the 12 October 2011 Policy Address, the Chief Executive’s last: it wrote a promissory note for full MPF portability, with the MPFA studying the supporting measures for its future launch. Paired with a “cut fees through competition” logic, the government hoped that wider employee choice would force MPF schemes to lower their charges.

What is full MPF portability?

Full MPF portability would let employees transfer the accrued benefits from both employer and employee MPF contributions to a trustee and scheme of their choice. In 2011, employees’ right of choice was still limited; the Policy Address said the MPFA was studying supporting measures for future full portability, with the government and the MPFA committed to promoting market competition so that greater employee choice would drive MPF fees down.

Why did the government believe competition would cut fees?

The logic: the wider the choice, the fiercer the competition between schemes, and the harder it becomes to sustain high fees. The address cited coverage of about 85% of the workforce and a 5.1% average annual return after fees (as of 2011) — while conceding the system was still at an early stage, with reform headroom doubling as fee-cutting headroom.

Withdrawal flexibility was on the table too

The same address proposed studying phased MPF withdrawals at retirement and early withdrawal in specific circumstances. Choice and withdrawal flexibility became the two keywords of that year’s MPF reform agenda.

To compare schemes’ funds and fees, try the MPF fund finder.