Push Employee Choice now: let the money follow the employee — a ten-year review

The MPF launched on 1 December 2000 — ten years on, and in investing, a decade is a long-term horizon. The scheme’s early days were full of political compromise: employers chose the scheme, not employees; and when workers were dismissed, employer contributions could offset long-service-payment costs — both unreasonable terms.

What has a decade delivered?

2.2 million members, 389 funds, HK$345.7 billion in assets. The MPF now covers 2.2 million people with 389 constituent funds to choose from; by September 2010, accumulated assets reached HK$345.7 billion — an average account balance of HK$155,096. A six-figure MPF account is starting to mean something to workers: not enough to retire on, but at least an emergency reserve.

How much does picking the right fund matter?

Equity funds up 66% in ten years, money-market funds up just 13% — a 53-point gap. On mpf fund performance, MPFA statistics show an annualised internal rate of return of 5.1% from December 2000 to September 2010 — reasonable, not stellar. But Lipper’s ten-year cumulative returns across the six approved fund types diverge wildly: bond funds +42.93%, equity funds +66.32%, mixed-asset funds +52.70%, money-market funds +12.87%, guaranteed funds +22.54%. Choosing equity over money-market a decade ago meant a 53.45-point difference — on the average HK$155,026 account, that’s HK$82,898. That eighty-thousand-dollar gap traces to a single decision ten years ago: whether you chose your funds with care when filling in the form.

What needs fixing?

Roll out Employee Choice fast, and trim the HK$3.5–7 billion fee pie. The second decade needs stronger investor education — members must at least know fund types and their risk-return traits; more choices, bringing in investment products like overseas index funds and REITs; and Employee Choice implemented as soon as possible, with the ultimate goal of money following the employee, not the employer’s choice. On fees: at 1–2% average annual charges on current asset scale, annual management fees run HK$3.5–7 billion — shared among just 39 registered schemes, roughly HK$100–200 million per scheme a year. There is clearly room to cut.

To pick the right funds for the second decade, visit MPF fund comparison.