MPF Reform Unfinished: Employees Deserve More Control

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

Unhappy with MPF returns, employees could choose other trustees from November. The change was welcome — but came with strings attached. Overall MPF reform still had far to go.

What was the root problem?

Employers decided; employees didn’t. MPF was meant to secure retirement for 2.35 million employees, yet since its 2000 launch employers had ruled: they picked trustees, employees only picked funds. The money was the employees’ — why no full control? A firm that never fears losing clients has no incentive to improve performance or service — poor results, high management fees anyway.

What else was unfair?

Two things. First, under the new rules employees could move only their own contributions; employer contributions stayed with the old trustee — and next year’s contributions too, until year-end. Second, offsetting: employers could use contributions to offset severance and long-service payments, effectively cutting retirement benefits.

What did employers get out of it?

Mutual back-scratching. Employers picking banks or insurers as trustees might find the chosen bank happy to offer cheaper corporate loans — the under-the-table logic behind employers’ reluctance to let go.

What is the lesson from 2012?

This 2012 editorial spelled out semi-portability’s ceiling early: moving half isn’t full portability; until offsetting goes, employees aren’t truly in charge. Years on: offsetting was finally abolished; full portability still hasn’t come. MPF reform was never one big bang — it advances one square at a time.