Polishing your MPF, step one: consolidate preserved accounts

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

Semi-free choice took effect on November 1. Under the old system, weak competition meant slow progress and high fees; under the new one, employees could move their contribution portion to another trustee once per calendar year — and as competition arrived, providers cut fees and improved service, creating room to improve returns.

Why is consolidation step one?

MPF was not yet 12 years old, yet most workers’ accounts already held six figures. The maths: on HK$10,000 monthly pay, HK$1,000 a month in contributions (HK$500 + HK$500) totals HK$120,000 over ten years.

Before chasing higher returns, stop returns being eaten away: ask yourself how many MPF accounts you hold. Every job change over the past decade created a preserved account. Old accounts get no new contributions but still pay annual management fees — returns erode quietly.

What’s the real cost of scattered accounts?

Investors who managed MPF well shared one trait: never holding more than one preserved account. Consider: HK$100,000 in one account — a 10% move is HK$10,000 won or lost, so you’d naturally read statements and watch performance. But HK$100,000 split across ten HK$10,000 accounts — who would truly manage them all? Most people file the statements away, or bin them.

MPF is one of three retirement pillars

MPF was designed as one of Hong Kong’s three retirement pillars (alongside government assistance and private savings). But the reality was that government old-age allowance was meagre; to avoid overburdening private savings or lowering retirement living standards, managing your MPF was essential.

Take step one: consolidate your preserved accounts and create an environment you can actually manage.