Cartland concerned by provident fund doubts
THE idea of setting up a central provident fund, which has been actively advocated recently, carries so many varied versions that the public is not fully informed about its implications, Financial Services Secretary Michael Cartland said.
''The Legislative Councillors who are keen to put forward the idea of a central provident fund do not spell out fully what such a scheme means to the people they purport to represent,'' Mr Cartland said.
Neither did they have a common understanding of what the scheme would be like.
''If it's like the Singapore one, which has raised from a five per cent contribution from employers and employees to about 40 per cent split between the two parties, then I am not sure if the public would like this idea,'' he said.
''Are the people of Hong Kong prepared to contribute up to 20 per cent of their income?'' he said, adding that this should be the first question to ask when initiating similar schemes.
The Singapore model, which resembles a compulsory savings scheme, is subject to many drawbacks.
Since the Government has a reputation of being ultra-conservative in investment, the maximum return on these funds can be as low as two to three per cent per annum.
''Furthermore, no government in the world can resist the temptation to use the fund for infrastructure projects,'' he added.
He said Singaporeans were borrowing money from the fund to invest, hoping to get better returns. ''That raises the question of why take the money from them in the first place,'' Mr Cartland said.
If the public was looking for retirement protection, there were other options available.
''There is already a route for employees to press for formation of employment-based retirement schemes, which are required to register under the newly-passed occupational retirement scheme ordinance,'' he said.
Another option was a decentralised compulsory scheme which required each employer to have one such scheme and which Mr Cartland considered ''the compulsory version of the existing voluntary scheme''.
However, he said any form of compulsion would require some sort of central oversight.
''It might be possible to devise some form of insurance mechanism whereby each scheme can insure with a central insurer against default or failure,'' he said.
Discussions on these technical problems are being conducted to assess the viability of such schemes and a decision will be reached in the next few weeks.
''If that appears to be a viable option, then a decentralised option may emerge as the strongest option,'' he said.