• Thu
  • Dec 25, 2014
  • Updated: 6:24pm
CY Leung policy address 2014
NewsHong Kong

No plans to scrap MPF 'offsetting' mechanism, says Leung Chun-ying

Chief Executive still weighing up action on employers' use of retirement fund for severance

PUBLISHED : Friday, 17 January, 2014, 12:52pm
UPDATED : Saturday, 18 January, 2014, 8:02am


  • Yes: 90%
  • No: 10%
18 Jan 2014
  • Yes
  • No
Total number of votes recorded: 182

Speculation that Chief Executive Leung Chun-ying was planning to abolish the much-criticised offsetting mechanism in the Mandatory Provident Fund was a "misunderstanding", the city's leader said yesterday.

"Alternatives" will be considered before a decision is made, Leung said, in the face of calls from unionist lawmakers, including some from the Beijing-loyalist Federation of Trade Unions, to do away with the mechanism.

The process allows employers to offset severance and long-service payments to employees against their contributions to an employee's MPF, the city's compulsory retirement account.

Speaking separately, labour minister Matthew Cheung Kin-chung said that when the MPF was established in 2003, a deal was made with employers to include an offsetting mechanism in order to ensure their agreement to the fund.

During a radio phone-in show on RTHK yesterday morning, Leung was asked whether it was wrong to think that he was going to scrap the mechanism.

"That's definitely a misunderstanding," Leung said. "I would like to forge a consensus between employers and employees as much as I can before we announce [any action] … After this policy address, I will continue with that consultation," he said.

"I want to make sure there is no devil in the detail that we overlook. I often remind myself of the experience we had a few years back when we legislated for the statutory minimum wage, when we didn't realise a simple matter like whether lunch hours should count for the minimum wage could become a [problem]."

On Thursday, FTU lawmaker Tang Ka-piu slammed the chief executive for "failing to make good on his election promise" that he would set out his plan to scrap the mechanism.

Leung said his election manifesto only stated that he would "adopt measures to progressively reduce the proportion" of accrued benefits attributed to employer's contributions that can be offset by the employers.

Yesterday, Tang insisted that Leung's problem was lack of time, not being misunderstood.

"The problem is that Leung has failed to explain clearly his plan," Tang said. "Even if he is only reducing the proportion, he needs time to amend legislation to make it happen. I don't know how he could find enough time to realise his pledge."

Leung also snubbed calls for a review of the one-way permit scheme, which allows 150 mainlanders a day to settle in Hong Kong. The scheme has been blamed by pan-democrats and the public for pushing up the city's property prices.

"Constitutionally the question of one-way permits is in the hands of the central authorities," Leung said. "If you look at the composition of the people who come down on these permits, who mostly come down for family reunion purposes, if you were in charge of deciding who can and who cannot come down, would you have a different decision?

"I probably wouldn't because it's all family reunion - children joining their fathers … and wives joining husbands in Hong Kong."



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This article is now closed to comments

Only the banks love the MPF - it's like roulette for them but with a fresh supply of money each month to gamble with, after taking their fees up front, but without any pressure to actually provide a return on their lousy funds. It's been a rip off since inception for all employees. Does the Government care? Of course not! Top civil servants receive a pension and have no idea what ordinary employees have to deal with. They don't have a clue and don't care to stop the banks from ripping us off. Face it CY - there will never be consensus and you're a fool to say such things in relation to the MPF.
The beneficiary of MPF are those banks or insurance companies which makes big money out of this scheme. It is ridiculous our money can only be spent on the fund while some safer and cheaper options like government bonds or index fund are excluded. Secondly MPF return depends very much on asset allocation and timing and it is beyond most people capability. Look at Singapore, the MPF are giving the employees lots of choice in using the fund including buying property. A cheaper scheme and more choices more freedom is what HK MPF scheme should aim at.
I don't understand why MPF contributors are not allowed to use their MPF to invest in property in HK or overseas. The whole MPF scheme is a rip-off that only benefits mutual funds and banks.
The only fee for the MPF should be a percentage e.g. 10% of the annual returns the funds generate. If there is no return generated there will be no fee for the fund managers which should make them working harder to make the funds worth the while .
As to the right of employers offsetting their contributions towards severance payments, this is an obvious error in the first place, and should simply be revoked. To allow such offset is contradicting the very basis in setting up the compulsory MPF, that is to create a retirement fund for the employees by making BOTH the employer and employee contribute monthly towards the employee's retirement account. The government should just start the process to correct this obvious flaw in the system.
It's good to see the views of commenters arguing about why the MPF scheme was in the first placed privatised and given to the banks and investments companies to manage instead of the government managing the contributions. The root of the problem which needs to be addressed is for the government to take the MPF scheme back into its management from the greedy and less than competent banks and investment companies. It's a regular monthly source of revenue which every sensible government will want to manage as it's fund can be better employed without the need for the government to issue bonds. The Singapore CPF module is a proven workable system - the government managing the funds by investing via its sovereign fund, allowing contributors to use it as deposits to buy HOS housing units ( thereby further ensuring the government get paid for their HOS projects and also secure additional monthly contributions from such contributors if the government provides the mortgage financing for the balance cost of the HOS housing units). This means the contributions grow bigger and is well retained to increase in value while at the same time providing relief to the housing needs and directly stabilising property prices. Why had not the government thought of this in the first place? Don't blame it on C.Y. Leung as it was before his term. It was the rather callous decision of the government then as it used the public to support the hefty profits of the banks and financial institutions.
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 - administered as sovereign funds - have been pretty decent and constant the past 30 years despite the two countries not being the financial centre that Hong Kong is. 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. Then and now, these two behemoths still do. In truth, nothing has changed.....
Those unionists make it sound as if the employers are unscrupulous and breaking the law on these MPF set-offs but in fact is perfectly legal. They should have tried harder to remove the set-off mechanism when the legislation was being passed through Legco rather than complaining now.
What is legal is not always right.
Of course the unionists did oppose this major clause, but the bill went thru nevertheless. Blame the lawmakers!


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