The proposal to boost employee control over their investment in mandatory provident funds will promote market competition, keeping fees and charges at a reasonable level, the Financial Services & the Treasury Bureau says.

The MPF Schemes Operation Review Committee and the MPF Schemes Advisory Committee have considered and endorsed the proposal. Legislative revisions may be tabled to lawmakers in the next legislative session.

According to the Mandatory Provident Fund Schemes Authority's proposal, employees will be allowed to decide whether they will transfer on a lump-sum basis all accrued benefits derived from their employee mandatory contributions from the employer chosen schemes to an MPF scheme of their own choice at least once a year.

Greater benefits

The proposal will benefit employees while avoiding proliferation of transfers and small-balance accounts. The risk of possible errors due to frequent transfers can be cut.

The proposal will also allow employees access to a broader spectrum of MPF service providers, schemes and investment funds for investment of mandatory contributions they make during their employment. Upon implementation, the proposal will result in 60% of MPF benefits being portable between trustees.

The authority said the proposed new arrangement will not add undue burden on the trustees' administrative duties, while the transfer of employee mandatory contributions will not require employers to change their administration system.

Taking into account the lead-time trustees require to make necessary adjustments and other preparations, the authority hopes the proposal will be implemented within a year after the legislative exercise is completed.

As a corollary of the proposal, the authority will rename "preserved accounts" as "personal accounts" which will instil in employees a greater sense of MPF account ownership.