MPF personal accounts: fewer is better, and transfers are once a year

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

Under the employee choice arrangement — MPF “semi-portability”, expected to launch in November 2012 — a new term entered members’ vocabulary: the personal account. It is simply the new name for the familiar preserved account, and some trustees had already made the switch by May 2012.

What is an MPF personal account?

An MPF personal account is the post-semi-portability name for a preserved account. Under the rules then in force, only a job change let you move all your old-job accrued benefits — both employer and employee contribution portions — to a chosen scheme’s preserved or contribution account; under the new regime, members may once a year sweep the employee portion of their current-job mandatory-contribution benefits into a personal account with a scheme of their choice — the employer portion stays put.

How many personal accounts should you open?

The law sets no cap on the number of accounts, but fewer is better. The once-a-year transfer right does not multiply with extra accounts; too many accounts make management harder and blur your view of overall performance, so you may miss the chance to adjust strategy as life stages change. Concentrating benefits in one scheme’s personal account is the clearest setup.

How does the once-a-year transfer work?

One lump-sum transfer per calendar year — 1 January to 31 December — from a contribution account. The example given at the time: a member exercising the right on 29 March 2013 could not transfer from the same contribution account again until 1 January 2014 at the earliest. Moving old-job accrued benefits faces no such frequency cap.

What should you watch when consolidating?

Consolidating old and current benefits into one personal account involves paperwork, processing time and the market risk of buying and selling funds. If you are in a guaranteed fund, read the guarantee conditions carefully, and consider professional advice before deciding. The MPFA noted that established trustees typically train and support their advisers to help members choose a suitable scheme.