How does MPF work: who actually handles your contributions?

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

Summer intern Billy had been on the job a month when his mentor took him to lunch and the talk turned to MPF. Billy’s first question: with employers and staff paying in every month, who manages the money? The MPFA?

How does MPF work — does the MPFA collect contributions?

No. Day-to-day operation of MPF schemes sits with trustees and their service providers; the MPFA only regulates and supervises. It is a basic distinction many people get wrong.

How do contributions flow?

Employer and employee contributions pass through the employer to the trustee, which pools and verifies them, allocates them to scheme accounts, and buys fund units according to each member’s choices. Investment managers then invest per each fund’s mandate, within the MPFA’s investment rules. As contributions keep coming, units accumulate in the member’s account and compound.

How does the MPFA oversee trustees?

By reviewing reports, inspecting on-site, demanding fixes — and punishing breaches. The authority vets trustees’ periodic reports, sends examiners into their offices, discusses improvements where inspections find gaps, and penalises violations appropriately.