Portable MPF assets set to jump from 39% to 67% once Employee Choice Arrangement launches

Portable MPF assets are likely to surge once the Employee Choice Arrangement (ECA) comes into force in the second half of 2012, the Secretary for Financial Services and the Treasury told a pension forum on 27 September 2011. The share of MPF assets that employees can move between providers could jump from the current 39% to 67%.

What is the Employee Choice Arrangement?

The Employee Choice Arrangement is the “semi-portable” MPF reform that allows employees to transfer the accrued benefits derived from their own contributions from one MPF provider to another at least once a year. Once the ECA takes effect in the second half of 2012 — after new regulation of MPF intermediaries is in place — portable MPF assets are expected to leap from 39% of total MPF assets to 67%.

A bill to strengthen the regulation of MPF intermediaries’ activities is being prepared, with introduction planned for the fourth quarter of 2011.

MPF system at a glance

The Secretary also disclosed the latest scale of the MPF system (as of the first half of 2011):

Fees already down from 2.1% to 1.82%

The Secretary expects the ECA to drive fees lower. The average fund expense ratio across MPF funds has already fallen from 2.1% in January 2008 to 1.82% in August 2011. “We believe there is still room for further reduction given the increase in the scale of MPF assets,” he added.

To compare fees and performance across trustees’ funds, see MPF fund search.