Gearing up for the MPF Employee Choice Arrangement: three preparatory steps

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

Hong Kong’s MPF “semi-portability” — the Employee Choice Arrangement — was expected to take effect in November 2012, giving members the right, once a year, to transfer the accrued benefits of their current employee mandatory contributions to a scheme of their choice in a lump sum. Before exercising that right, members were advised to start with the basics: know their needs and review their accounts.

What is the Employee Choice Arrangement?

The Employee Choice Arrangement is Hong Kong’s MPF “semi-portability”. From November 2012, members could once a year transfer the accrued benefits derived from employee mandatory contributions during current employment to a personal account under a chosen scheme; the employer’s contributions stayed with the employer’s trustee and could not be moved. The aim was to give members greater autonomy over their MPF.

Step one: know your risk appetite

Investment objectives, risk tolerance and time horizon shift with life stages. People of the same age can face very different burdens: single workers, with lighter family commitments, tend to invest more aggressively; married members with children usually prioritise stable, predictable returns. Members should take stock of their circumstances and pin down their objectives and risk tolerance.

Step two: review investment performance

With risk appetite established, members should check whether their current mix still fits — using fund fact sheets and annual benefit statements issued by trustees, which record contributions, year-end unit prices and holdings, and performance since the account opened. A mismatch can be fixed by switching funds within the same scheme, or — once the arrangement takes effect — by transferring to a chosen scheme.

Step three: weigh every factor in choosing a trustee

Fees and returns matter, but so do a trustee’s financial strength, business direction, responsiveness to market needs, dealing details and fund-switching turnaround times. MPF is a decades-long commitment aimed at retirement security; it repays a little homework. Professional financial advisers can help members who want guidance.