The Mandatory Provident Fund (MPF) is a compulsory pension fund designed by the Hong Kong government as a major protection scheme for the aged and retired residents. Most employees and their employers are required to contribute monthly. A 2012 study by the Consumer Council shows that almost half of the MPF funds have posted losses in each of the past five years.
Lobbyists work to change pension rule that has cost workers HK$20b
Legislators and unionists make little progress on changing rule that has cost workers HK$20b
Legislators and unionists pressed government officials yesterday to scrap or lower the controversial offset provision in the Mandatory Provident Fund pension scheme which has allowed companies to save more than HK$20 billion in the past 13 years at the expense of employees' retirement savings.
However, they failed to secure a concrete timetable for any change, with officials at a Legislative Council meeting only agreeing to follow up their suggestions.
Officials from the Financial Services and the Treasury Bureau and the Labour Department met representatives of more than 40 business sector organisations and labour unions for the largest debate yet on proposals for changing the offset provision.
Some unionists and lawmakers want the government to change the law in the next few years to abolish the mechanism, which allows bosses to use their portion of contributions to the MPF to offset the severance or long-service payments due to an employee - up to a maximum of HK$390,000.
Government statistics show that between July 2001 and June last year, employers used HK$20.7 billion from MPF contributions to offset severance and long-service payments.
"If there is no offset and the HK$20.7 billion could remain in the employees' MPF accounts, it would help to enhance their retirement protection substantially, particularly the low-income earners," said Ng Koon-kwan, organising secretary of the Confederation of Trade Unions, who spoke at the meeting.
Ng said Chief Executive Leung Chun-ying had promised during his election campaign in 2012 to change the offset provision, but nothing had been done.
Legislator Chan Yuen-han, from the Federation of Trade Unions, said many workers had complained to her that they had only HK$10,000 or HK$20,000 left in their MPF accounts after the offsetting of severance payments.
"This shows the offset has led to many low-income earners failing to have a reasonable amount of money in their MPF to support their retirement," she said.
Chan said that meant the workers might need to apply for social security when they retired, which would eventually add to the burden borne by taxpayers. "Scrapping of the MPF offset would benefit society as a whole," she said.
Business sector representatives and their lawmakers, however, strongly opposed any change, saying it would add to their operating costs.
"Many of the 300,000 small and medium-sized enterprises have been struggling with rising rent and rising wages," said lawmaker Tommy Cheung Yu-yan, who represents the catering sector.
"If the MPF offset was scrapped or lowered, it would add to their operating costs and some may be forced to close."