• Fri
  • Dec 26, 2014
  • Updated: 1:46am
My Take
PUBLISHED : Friday, 17 January, 2014, 11:56pm
UPDATED : Saturday, 18 January, 2014, 12:36am

MPF doesn't work for the little guy

A fund manager friend calls it the Mandatory Poverty Fund. Most of us call the MPF by its more polite name. But my friend has a point. The way the quasi-pension fund is run now, you are guaranteed a life of penury if you have to live on it after retirement.

In the past decade, the only people who have really been benefited were managers in the banking and fund management industry, for which MPF fees and charges have been a bonanza. And while I admit bosses don't like having to contribute their shares of MPF into workers' accounts, it has not been a complete drag for them.

Hong Kong is probably the only developed economy that allows employers to legally raid such pension accounts to pay for - "offset" in technical terms - a worker's severance and long-service payments. Everywhere else it's a jailable offence. So if you lose or change jobs a few times, you can pretty much kiss your bosses' parts of the MPF contribution goodbye.

I give Chief Executive Leung Chun-ying credit for at least openly acknowledging this problem. Still, it is a disappointment that he didn't do anything about it in the latest policy address, as many people had expected he would. So there was a misunderstanding, as he said yesterday on radio. He would never, of course, ban this "offsetting mechanism" in one fell swoop; the business community would never let him do it. Nevertheless, he could and should start introducing limits on how much bosses could dip into their contributions to an employee's MPF account in coming up with funding for severance and long-service payments. It should eventually be phased out.

"Offsetting" was not originally proposed in the MPF scheme. But the Liberal Party, after the handover when it still had influence, effectively forced the government to allow it as a condition for its supporting votes for its passage in the Legislative Council.

So the Federation of Hong Kong Industries is being disingenuous when it claims the "offsetting mechanism" should not be amended because it was the outcome of a consensus. There was no consensus, only a cynical move by the business community and its Legco pals to make sure the MPF works for everyone except the little guy for whom it was designed to protect in the first place.


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This article is now closed to comments

Welcome to the world's most free economy!
Spot on, Alex. Welcome back.
Welcome to reality. There is not much that works for the little guy in Hong Kong. The MTR perhaps, but when you begin to think about the way that infrastructure is paid for, even that turns out to be merely he silver lining to a dark cloud of high land premiums and unaffordable property.

If some evil genius would want to design a society that wholly serves the vested interest of a small (business and political) elite without resorting to violent coercion of the rest of the population, Hong Kong is probably just about what you'd end up with. Provide bread and games to hoi polloi, and maintain a very thin shimmer of hope called social mobility, which -in theory- is possible. But only really in theory for in practice there are very few exceptions to the rule.

Gee, I wonder if perhaps we have a problem with our system of government that puts in place (and then maintains, even when the power supposedly shifts to a slightly different camp) such disgraceful policies like the MPF?
Right when the scheme was conceived, crtiics were slammed when they voiced opposition to the really unfair terms proposed by the govt.
They could have just adopted the Singapore or Malaysian model lock, stock and barrel. The annual returns from both these funds - adminstered as sovereign funds - have been pretty decent and constant the past 30 years. The funds have also helped workers to pay for property or medical care - here in HK, you would be very lucky if you could get your capital back when you retire.
But of course, the empolyer and finance lobby called the shots in the end. Of course, then and now, these two behemoths still call the shots. Nothing has changed.....
John Adams
I had to laugh ( albeit sadly) when I watched an interview on TV the other day with some government / MPF spokesman about how it was that we have this absurd anomaly in the MPF rules.
He said it was because we would never have had got the MPF off the ground in the first place if there had not been some consensus on this issue "between employers"
He didn't even bother to add "... and their employees"
So much for two-sided consensus !


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