Employees have used their newly won power of choice over their retirement fund provider to overwhelmingly stay put.
While the move to allow switching of MPF funds was hailed as the scheme's most significant reform since its launch in 2000, only 64,000 employees have opted to do so since being granted that choice on November 1 last year.
The transfers from November to April represent only 2.7 per cent of the 2.42 million employees covered by the MPF, according to the Mandatory Provident Fund Schemes Authority (MPFA).
The figure is well short of the expectations that 10 per cent of employees would make a switch.
The reform enables employees to change their fund providers once a year. Before November, only employers could choose the MPF providers, and employees had been stuck with that choice even if they were unhappy about fees or services.
Rex Auyeung Pak-kuen, Asia president of the American company Principal Financial Group, an MPF provider, said: "It is still a new concept for employees to have the right to choose their MPF providers. Many of them will take a wait-and-see approach to judge if they want to shift their providers."
Auyeung said he had seen a similar number of employees join and leave his company's MPF scheme but he believed the impact would become more pronounced when workers became more familiar with the new rule.
Industry players said that despite the low transfer rate so far, they believed the rule change would still benefit employees as it forced providers to offer better services and fees.
It also allowed some insurance companies to expand their client base by taking clients away from banks.
Michael Huddart, the chief executive of Manulife International, one of the largest insurers in the city, said his firm had seen a significant increase in MPF members transferring from other providers.
"We have seen continuous transfer-in cases. We believe this will continue in the second half of this year as we would remind our members of the benefits of account consolidation," Huddart said. "We are optimistic for continuing growth."
Roger Steel, the president of new markets and business development at Sun Life Financial Asia, said his company had also gained new customers making a switch, pushing the company's ranking in terms of new business in the first quarter up to third, from 12th five years ago.
Thomas Chan Yu-cheong, the chief executive of BOCI Prudential, said he had seen a net loss of about 3,000 customers who moved to other providers.
"I believe we are better off than many other banks but we have lost some customers to some insurers."
This was because many banks were not aggressively inviting customers to shift to join their MPF schemes while some insurance companies were offering high commissions to encourage their agents to invite members to shift to their plans, Chan said.
He said banks were held back on capturing new MPF transfers because of a restrictive rule of the MPFA requiring that only designated bank staff could explain to potential customers the risks and procedures associated with fund transfers.
In contrast, the big insurance companies can mobilise their thousands of agents to pitch for MPF transfers.
"The insurance companies usually sell through agents who sell on relationship and they are in a better position to pitch clients for the MPF transfer," Chan said.
"BOCI-Prudential is a joint venture of a bank and an insurer, so we are not doing too badly when compared with other banks in this game change."
HSBC, both the largest bank and largest MPF provider in the city, is reluctant to say if it has lost many MPF employees to other providers. It would only say that the "peak of switching inquiries took place during the first three months" after the new rule launch and "the number of switching inquiries has decreased since then during the past few months".
In contrast to many insurers, who believe the switches will continue to increase, HSBC said it expected the number of people switching funds would further decline in the second half of this year.
The MPF, established in 2000, is a compulsory retirement scheme requiring employers and employees to each pay a sum equal to 5 per cent of the employee's salary, up to a combined HK$2,500 a month, to an MPF provider such as a bank or fund company. Workers can access their contribution plus any investment returns at 65.
The scheme has long drawn criticism for high fees and low investment returns. The move to letting employees choose their own provider is aimed at putting pressure on provides to address these complaints.
The November reform allows employees to transfer their own contributions to a new provider of their choice once a year, although the employer's contributions will stay with the original provider, as will new contributions from both the employer and the employee for the next year.
The Secretary for Financial Services and the Treasury, Chan Ka-keung, has said that in three years the government will study a further reform to let employees transfer all their MPF assets, including those contributed by their employers, to their preferred provider.