CY Leung’s administration must keep its promise to strengthen pension scheme
Addressing the resistance from the business sector to abolishing the MPF’s offset mechanism would be a good starting point
Chief Secretary Carrie Lam Yuet-ngor has described controversy over a concession to employers in the MPF scheme as a “mountain” still facing the administration, four years after Leung Chun-ying promised to level it. Now the MPF authority has turned up the pressure by backing calls for a review. The mechanism that allows employers to reclaim their modest contributions to offset severance and long-service payments upon termination of employment is not the only issue.
Mandatory Provident Fund Schemes Authority chairman Dr David Wong Yau-kar has also suggested it is time to consider raising both employer and employee contributions, and that employees could be allowed to used part of their MPF savings to buy their first property – also a means to build security.
Pension schemes may be aimed at funding retirement, but MPF contributions are too low and fees too high to achieve that for many people. The authority regulates the MPF and is not responsible for policy. Nonetheless, in a submission to a public consultation by the Poverty Commission, Wong effectively called for a rethink of the offset mechanism. “We notice that this problem exists and we are very concerned about it,” he said.
The concession was a trade-off in return for business support for the retirement-saving scheme introduced in 2000. Employers have used the offset mechanism to claw back about HK$25 billion of contributions to their workers’ retirement funds, which does nothing for the objective of a scheme that is underfunded anyway.
Labour minister Matthew Cheung Kin-chung has vowed to strike a balance between different views when taking Leung’s pledge forward. Business is understandably concerned about costs if the mechanism were scrapped. But it is too easily abused and, after 16 years, it makes a mockery of retirement policy in an ageing society. Business will have nothing to gain from the financial insecurity of an ageing population of consumers.
An official has noted that the government and the authority agree that as one of the key pillars of retirement protection, the MPF should be strengthened. We can’t think of a better place to start – and demonstrate resolve – than remedying the offset anomaly. Given prevailing economic sentiment, it may be unrealistic to expect concrete action in the remaining year of the administration’s current term. But the government still needs to tackle the issue as promised and addressing the resistance from the business sector would be a starting point.