Here's the good news and the bad news. As of last week employees can benefit from the new Mandatory Provident Fund Employee Choice Arrangement scheme. The bad news is that the choice will be limited in a most surprising way.
The idea is to give employees a better choice of fund providers for their part of the MPF contribution. The employer's contribution will remain in the hands of whichever company they selected for this purpose in the first place.
So far, so bad but what is not generally known is that although employees will have an annual opportunity to switch funds they will not be able to transfer new payments in their funds.
In other words only existing investments can be transferred; all new payments will have to go to the original fund selected by the employer although they too can be moved after a year and, assuming that MPF contributors have the energy to do so, they can repeat the transfer on an annual basis.
Furthermore, employees can only transfer funds they contribute to a plan, not their employer's contributions. That money stays with the fund provider selected by the employer. (See cover story, linked).
It is unclear why this restriction lingers because anyone choosing to transfer must be doing so because they are not satisfied with their current fund manager. Yet they are stuck with that manager until they change jobs or the MPF Schemes Authority (MPFA) grasps the nettle and gives employees a full choice of where their funds are invested. The authority is mulling the idea of allowing employees to switch all funds from the original provider but the mulling is taking a while.
And while they are thinking about this they should also be thinking about allowing employees to shift the employer's contribution because although the employer has a statutory obligation to make these contributions they are made for the benefit of retiring employees not retiring employers.