Paying the price for MPF plan's lack of credibility
Sometimes, good intentions may not be good enough. This year's budget is a good example. With a handout amount double that of last year, it still drew a barrage of criticism instead of praise.
A one-off injection of HK$6,000 into each MPF account, costing the government HK$24 billion, turned out to be the most criticised measure. Financial Secretary John Tsang Chun-wah must have least expected that.
The government introduced a similar measure in a previous budget when it injected HK$6,000 into the MPF accounts of people earning less than HK$10,000 per month. That measure benefited 1.7 million people and was well received by the public. It is rather puzzling, then, that this year's scheme has garnered such a different response.
There are a few reasons for this, the most important being the principle of fairness. The previous MPF injection was clearly aimed at helping low-income earners; it was a poverty relief measure. This year's measure covers every member of the workforce without a clear focus.
In theory, a sum of HK$24 billion is enough to benefit 4 million people, but in reality only 2.5 million people have MPF accounts. Even if we include the 380,000 employees on the Occupational Retirement Schemes, who will get the handout if they open an MPF account, fewer than 3 million people will benefit. A lot of people in the workforce will be excluded.
First to hit out against the MPF handout were some 120,000 civil servants, including public school teachers, who receive government pensions. The government later clarified that these teachers will be covered but workers with public bodies such as the Hospital Authority will be excluded. The rationale is unfair, giving people an excuse to bash the administration.
Honestly speaking, civil servants on government pensions are much better off than most people who are on MPF and other retirement plans. For example, under the MPF scheme, most employers contribute only 5 per cent of their income. But in the pension scheme, the administration has to contribute from 5 per cent up to 25 per cent, according to the seniority of staff. It's baffling to see civil servants willing to take to the streets over HK$6,000.
Tsang has pledged to review the budget proposals in relation to the MPF handout and tax rebate, so if they insist on staging a protest this Sunday, it will expose their greed.
But if we look further, we can understand why public sentiment has been so against the administration. There are a few fundamental reasons - the prevalence of social conflict and anti-rich sentiment, the worsening wealth gap and the inadequacy of the MPF scheme.
It is understandable why there have been allegations that the MPF handouts would be equivalent to transferring benefits to fund companies and managers. Administrative costs alone amount to about 2 per cent; that means fund companies will get at least HK$480 million. The MPF scheme has been in force for 10 years and administration costs have already totalled HK$33.3 billion - or HK$13,300 from each MPF account. Now it's clear why the HK$6,000 handout has been so unpopular.
The seeds of discontent were in fact sowed by the central government before the handover when it came out with the conspiracy theory that the Hong Kong colonial government was trying to bankrupt the city by splashing out on infrastructure projects, such as the new airport, and by introducing a retirement scheme for the workforce. The airport has definitely benefited Hong Kong as an international transport hub but, unfortunately, the retirement plan has effectively bankrupted the government in terms of credibility.
