Think Twice Before Switching Your MPF Provider

Rewritten from reporting published in April 2012.

With “semi-portability” expected by the end of 2012, many employees were already itching to switch trustees. But should you move the moment you are allowed to? A newspaper column, written as an office dialogue, urged members to think through several points first.

What Should You Consider Before Switching?

Before switching, compare your current trustee’s services with other trustees’, look at the fund choices and fees across plans, and match them to your investment objectives and risk tolerance — never switch just for the sake of it or because everyone else is. If you are satisfied with your current trustee and plan, you can simply leave your benefits where they are and keep investing.

How Long Does the Transfer Take?

The whole transfer process takes about six to eight weeks, during which your accrued benefits sit in cash and are not invested in any fund — an investment gap. Fund prices can move during that window, and switching does not necessarily deliver better returns, so do not rush to be first just to follow the trend.

What Is the Biggest Risk of Switching?

The biggest risk is market movement during the investment gap, which can force you to “sell low and buy high.” Your accrued benefits must first be redeemed for cash by the old trustee and then used by the new trustee to buy into new funds — prices can swing either way in between, so act on your own needs, not the hype.

What If You Hold a Guaranteed Fund?

If you hold a guaranteed fund, transferring may breach its guarantee conditions — for example, if your investment period has not reached the “lock-in” period, the guarantee will not pay out. Before switching, check whether your funds carry such terms, so the move does not cost you the guarantee itself.