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Evolving with the times

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When gauging the pros and cons of Hong Kong's MPF system, it is tempting to take retirement schemes operating in Singapore or Australia as a natural point of comparison.

That approach, though, has immediate flaws, as experts in the field of employee benefits are quick to emphasise.

'You are not comparing apples with apples,' says Philip Tso, director, investment services, for Towers Watson in Hong Kong. 'For example, Singapore's CPF [Central Provident Fund] has been in place since 1955 and the combined contribution rate is 35.5 per cent - 20 per cent from employees and 15.5 per cent from the employer. Regulators in Hong Kong can have aspirations or use other places as reference, but they can't just 'copy and paste'.'

So, while Singapore may allow workers to draw on accumulated CPF funds to buy a flat or cover short-term medical expenses, suggestions of Hong Kong moving in that direction are more like wishful thinking.

Australia, with a 9 per cent employer contribution going into a superannuation scheme set up in 1992 - and talk that this could rise to 12 per cent in a couple of years - essentially operates by a different set of rules.

Therefore, the MPF, which began in 2000 and is still based on 5 per cent contributions from employee and employer, should only be viewed on its own terms. And, while there is always scope for improvement, any ideas in this respect must take due account of the MPF's original purpose and current platform before trying to reach for the stars.

'The scheme's first priority is to save for retirement,' says Elaine Hwang, director of benefits in Hong Kong for Towers Watson. 'If you allow people to use their balance for other things before retirement, then the worries [about financial security in later life] increase again.'

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