Too many MPF fund choices? Workers say keep it under ten

This article is a rewrite of a report from August 2012.

Era analysis: The original was only a digest of a few figures from a Towers Watson MPF survey. On the eve of the Employee Choice Arrangement in November 2012, the sheer number of MPF funds had become a problem in itself — hundreds of options, and workers could not tell them apart.

The survey covered 200 employers and 1,000 employees, and turned up several telling patterns:

Why did workers find the choices overwhelming?

Because more does not mean better. The rapid growth in MPF products made it hard to tell which fund suited whom — the double edge of the choice arrangement: more freedom, but harder decisions. For most workers, fewer than ten clearly categorised funds were easier to navigate.

What mattered most to workers?

Guaranteed funds topped the list of concerns (46%), ahead of fees (40%). After the financial crisis, capital-preservation instincts dominated many choices. But guarantees usually come with conditions — such as lock-in periods — and moving out can forfeit them.

On early withdrawals: fewer than 5% of employees backed the MPFA’s proposal to allow withdrawals for the terminally ill, while 63% thought critical illness should qualify. And on retirement adequacy, 70% of employees understood MPF alone would not suffice, yet felt no urge to review their portfolios.