The MPF Schemes Authority has suggested the first major changes to the city's compulsory pension system since it was set up 11 years ago. They have been keenly awaited, amid criticism that contributions are too low, while management fees and the like too high to provide workers with a big enough sum for a dignified retirement. These are matters of government policy and market forces rather than administration. Proposals unveiled by authority chairwoman Anna Wu Hung-yuk focus on enhancing flexibility of access to savings by MPF account holders. Retirees would be able to withdraw money from their MPF accounts in instalments at times of their choosing instead of in a lump sum at age 65. This would encourage them to plan financial management in retirement while allocating their remaining MPF balances to an investment mix that suits their circumstances.
More controversial is allowing people to withdraw money before 65 in time of urgent need, for example serious illness. As a response to dire, medically certified health circumstances, this would be sensible as well as compassionate. But it also conjures up a scenario that the authority surely cannot have in mind. That is where a chronically ill person finally loses their job because of absenteeism, the employer exercises its right to raid MPF contributions to fund the employee's severance and long-service leave payments, and then the account holder makes withdrawals from what is left for ongoing support. That is more like a poverty trap than a social safety net.
A consultation later this year will also seek the public's views on early withdrawals in the event of job loss, or to cover education expenses or a down payment on a home. These sound ahead of their time given that the scheme is underfunded for its main purpose.
While the MPF has accumulated HK$378 billion in assets, it remains unable to provide financial security for retirees. Considering our ageing population, the government must address the scheme's shortcomings before much longer.