Three Moves, One Target: AIA’s Pre-ECA Play for MPF Customers

Hong Kong’s Employee Choice Arrangement — the MPF “semi-portability” reform — was expected as early as November 2012, and although half a year away, AIA Pension and Trustee, the market’s third-largest provider, had already fired three shots to get ahead: a fee cut, a faster digital switching process, and flexible staged withdrawals. In the 2012 climate, with MPF fees under constant fire, a price war among trustees looked imminent.

What were AIA’s three moves?

AIA’s three moves were: a one-off 0.2% management-fee cut, an iPad-based electronic switching process, and staged MPF withdrawals for retirees. Each targeted one of workers’ top three concerns — fees, speed, and withdrawal flexibility.

1. The fee cut: customers joining a voluntary-contribution plan, or shifting a retained account (an old balance left behind after changing jobs) to AIA, enjoyed a one-off 0.2% fee reduction — putting more of every dollar to work.
2. The digital push: from 21 May 2012, customers could complete switching paperwork on a pre-set iPad app via an online platform, with fund switches completed in as little as one day.
3. Flexible withdrawals: retirees could choose between two staged-withdrawal options — by a specified amount, or over a specified term of up to 20 years — instead of cashing out everything at once.

According to an AIA MPF senior vice-president, the fee cut was about squeezing more investment return out of every cent members contributed. Once the ECA took effect, members would be able to move the employee portion of their mandatory contributions to a chosen scheme once a year — and the fight for customers would only intensify.