Know the Risks Before Switching MPF — Once a Year Only

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

Last time: the three switching steps. This time: the risks. Found your ideal trustee? Next comes the transfer — six to eight weeks of it. Switching MPF isn’t risk-free: the blackout window, the once-a-year rule, guaranteed-fund terms — know them all.

How often can you switch each year?

Once, in one go. Semi-portability lets workers move only their own contributions’ accrued benefits; the employer’s share stays; and only once a year, all at once. Note: switch on day one (1 November) and the remaining two months’ new contributions stay in the old scheme — new money doesn’t follow; the next switch can be applied for on 2 January at the earliest.

What’s the blackout-period risk?

Six to eight weeks — buy high, sell low. The whole transfer takes 6–8 weeks: cash out of the old funds, buy into the new — an investment vacuum in between. You control neither the window nor the dealing prices — buy-high-sell-low losses are possible.

Can guaranteed funds be switched?

Switch early, lose the guarantee. Some MPF portfolios hold guaranteed funds locking contributions for set terms with promised returns; early switching breaches the terms and forfeits those returns. Before switching, know exactly what you hold and read the terms.

Can funds trade instantly?

No — don’t treat them like stocks. Over 70% in a survey expected to control fund dealing times and prices themselves — a misunderstanding. Funds aren’t stocks; there’s no instant trading. The chief executive of an MPF consultancy expected the blackout to dampen switching appetite — better to stay put; she suggested parking accrued benefits in a money-market fund to time entry and avoid buy-high-sell-low.

What is the lesson from 2012?

Know the risks to earn the switch. The 2012 risk guide was the sequel to the three steps: once a year, one go, a 6–8 week vacuum, guaranteed-fund terms — know all four for an informed choice. Switching MPF isn’t about never switching, but switching with eyes open.