Ten years of MPF letters, ten per cent of gains: a blogger’s tidy-up

After nearly a decade at work, one Hong Kong blogger had never paid attention to his MPF — until a flat move unearthed years of MPF letters. Sorting through several accounts covering ten years, he found his pot had grown just over ten per cent in total: positive after fees, but far too small, he felt, to retire on. His story captures a familiar 2012 predicament.

Why only ten per cent in ten years?

MPF is a long-term investment, but long-term does not mean unattended. As of April 2012, the average MPF expense ratio in Hong Kong was 1.74 per cent a year — over a decade, that compounds into a heavy drag; and many workers left old accounts scattered across job changes, parked in conservative funds whose returns trailed inflation. Neglect, fragmentation and fees are the usual suspects behind a decade of single-digit growth.

The 2012 worker’s MPF predicament

MPFA figures put preserved accounts — old accounts left behind after job switches — at 4.035 million at end-March 2012, or about 1.5 per worker across Hong Kong’s 2.576 million employees and self-employed persons. One survey found nearly half of respondents had never consolidated theirs. Scattered accounts, zero attention and high fees: the blogger’s tidy-up turned up all three.

Consolidation: three steps to take back control

1. Count your accounts: anyone who has lost track can ask the MPFA, which holds every member’s account records.
2. Pick one trustee and consolidate: file one transfer form per account with the new trustee — no need to notify former employers. Fewer accounts are easier to manage and to adjust as life stages change.
3. Don’t wait for employee choice: the Employee Choice Arrangement (“semi-portability”) was due in November 2012, but consolidating preserved accounts could be done immediately. Many workers hoped the arrangement would spark a fee war and push down that 1.74 per cent over time.

Ten per cent in ten years is less an indictment of MPF than of neglect. Sometimes it takes a flat move — and a pile of old letters — to discover how scattered a retirement pot has become.