Mandatory Provident Fund (MPF)

John Tsang cautious over changes to mandatory provident fund scheme

Financial chief urges caution while admitting system has fallen short on retirement protection

PUBLISHED : Monday, 26 May, 2014, 5:31am
UPDATED : Wednesday, 26 October, 2016, 2:38pm

Hong Kong's mandatory provident fund scheme should not be hastily done away with, the financial secretary says, although he concedes the system has failed to give low-paid workers and the unemployed enough retirement protection.

"[An MPF overhaul] will have far-reaching implications. A decision [to change it] should not be made hastily. [Retirement protection] should not be used as a bargaining chip," John Tsang Chun-wah wrote on his official blog yesterday.

The post was seen as an implicit attack on radical pan-democrat "Long Hair" Leung Kwok-hung, who had launched a filibuster to delay the budget bill, hoping to press the government to replace the MPF system with a universal pension scheme.

Leung has vowed to do the same next year unless the government gives in to his demand.

In his blog, Tsang wrote that retirement protection was a very important topic that required consideration from various policy perspectives.

He admitted the MPF system "cannot deal with the unemployed population's retirement protection, and its protection for low-wage workers is also not enough", and agreed it was now time to review the scheme. He noted that a University of Hong Kong professor, Nelson Chow Wing-sun, was expected to submit a report to the Poverty Commission later this year.

Under the scheme, employees and the self-employed aged between 18 and 65 make regular mandatory contributions at 5 per cent of their income, which they can withdraw when they retire. Employers also contribute 5 per cent of an employee's monthly salary, capped at HK$1,250.

But many have been frustrated by the scheme's high administrative fees. Critics also say the benefits will not be enough for a retiree to live decently on.

"Certainly, there is still much room for improvement for the current MPF system," Tsang wrote. He said the government had introduced measures to increase competition and enhance transparency within the system in order to lower the administrative fees involved.

However, speaking on RTHK's City Forum programme yesterday, Leung reiterated that the government should set up a HK$50 billion seed fund for a universal pension scheme instead.

"In Leung Chun-ying's manifesto, he said we should … set up an elderly care fund," Leung Kwok-hung said. "Why is it wrong for me to call for the chief executive to use HK$50 billion to deliver on that?"