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.
MPF no substitute for pensions, says consultant Nelson Chow
Hong Kong's mandatory retirement contribution scheme is no substitute for pensions, says a former advocate of the Mandatory Provident Fund.
Nelson Chow Wing-sun, chair professor at the University of Hong Kong's Department of Social Work and Social Administration, helped the government formulate the fund in 1998. Now he's a consultant studying various pension schemes for the Labour and Welfare Bureau.
He has criticised the government for ignoring the pension issue during the public consultation to devise a population policy. "People's security should be placed before economic development," Chow says. "The elderly won't spend money if they are feeling insecure."
About 85 per cent of the working population is covered by retirement schemes, according to the Mandatory Provident Fund Schemes Authority. The fund, launched in 2000, covers 72 per cent of workers. The rest are self-employed or low-income residents, who are not required to join the system.
If a worker earns more than HK$7,100 a month, he or she and their employer must contribute 5 per cent of the income. The monthly contribution is capped at HK$1,250 for people who make more than HK$25,000. Employees can't withdraw their savings until they turn 65.
But critics say the system has drawbacks. Companies usually want their workers to retire at 60, meaning people must find other ways to get money until they can draw on the fund. Also, employers can use their contributions to offset severance payments and long-service payments.
"The system helps you save. But the amount isn't enough for retirement," Chow says. "It cannot replace a pension scheme."
According to Chow, after 20 years of saving, a worker would have accumulated HK$1 million to HK$2 million. Thirty years of saving could yield HK$3 million.
That top amount is not enough for a Hong Kong man, whose life expectancy is 81, nor a woman, whose life expectancy is 86.
And yet residents are expected to live longer: by 2041, the average male is expected to reach 84 and the average woman 90.
Chow says he is not optimistic the present administration can devise a pension scheme, given its weak governance.
"But it should at least include it in the consultation document to show its commitment," he says.