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Confusion as MPF switch put on hold

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The government has abruptly postponed the introduction of a long-awaited provision allowing employees to choose their own mandatory provident fund trustees.

Having spent months preparing the public for the switch, yesterday it said more time would be needed to introduce legislation. Undersecretary for Financial Services and the Treasury Julia Leung Fung-yee cited as the main reason the need to better protect MPF contributors from mis-selling such as occurred in the Lehman Brothers minibonds fiasco.

Without being able to give a precise time frame, Leung hoped the new law could be ready before the end of next year.

'We need to spell out details such as the penalty for malpractice,' she said. 'We have to clarify the powers and responsibilities of several regulatory bodies.'

The surprise announcement caused confusion among union leaders and in the fund management industry, since the concerns the government has now raised would have been known to officials and had long ago been raised by critics.

The 'employee choice arrangement' was scheduled to go into effect in April next year. It would have allowed 2.3 million employees in the city to choose which MPF provider managed their share of pension contributions. Employees contribute 5 per cent of their salary, capped at HK$1,000 a month, to a retirement account. This is matched by their employer.

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