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Mandatory Provident Fund (MPF)

Hong Kong pensions proposal needs some careful thought

Allowing withdrawals to help finance first-time home purchases seems a good idea, but it would have implications for the property market and retirement scheme

PUBLISHED : Sunday, 21 January, 2018, 1:28am
UPDATED : Sunday, 21 January, 2018, 1:28am

No Hongkongers would be foolish enough to believe that their Mandatory Provident Fund savings could give them a decent retirement. So instead of letting fund managers lock up and cream off their hard-earned savings for a few more decades, how about using them for some meaningful causes now, such as financing first-time home purchase?

The proposal is not new and was introduced some time ago elsewhere. But whether the city should follow suit is another matter. The MPF Schemes Authority said its feasibility study on allowing individuals to draw retirement savings to help buy a home would be ready later this year. It is good to hear that the pension fund regulator is mindful of the implications for the property market and that even if such a step is to be taken, it will not be any time soon.

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When the scheme was put in place in 2000, the authorities sensibly ruled out advance withdrawals for buying a home, surgery, studying and the like. Unless one intends to quit Hong Kong for good or suffers a terminal illness, the contributions – a minimum of 5 per cent each from workers and bosses – are basically put aside until one reaches the age of 65. Inadequate as it is, the scheme, after all, is meant to be a retirement safety net. It would defeat the purpose if a lion’s share of one’s savings was depleted for whatever reason.

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Arguably, buying a home can enhance social security and retirement protection. But the runaway property prices in recent years make the down payment, often more than HK$1 million, unaffordable. Tapping into one’s own savings to fulfil the home ownership dream may therefore seem justifiable.

But with an average saving of around HK$200,000 per individual at the moment, the proposed policy change will not help much anyway. There are also practical issues for consideration. Will the property market become overheated in light of the change? Should one return the money to the account if the property is sold eventually? More importantly, will it weaken the MPF as a retirement safety net? These issues must be thoroughly examined before deciding on the way forward.