It would be good to think a proposed rise in contributions to the Mandatory Provident Fund by both workers and employers is an overdue step towards adequate financial provision for retirement. Instead, it is the latest adjustment in the cash value of contributions to take into account increasing wages over the years. As such, it does little to address the fundamental weakness in the scheme of inadequate contributions, compounded by high administration fees and employers’ right to dip into pension funds to offset severance and long-service payments.

Under the proposal by the Mandatory Provident Fund Schemes Authority, the contribution rate of 5 per cent of salary would remain the same, but the salary cap on which it is calculated would rise in two stages over two years, from HK$30,000 to HK$39,000 and then to HK$48,000. The cash value of the maximum contribution would rise from HK$1,500 a month to HK$2,400 a month. News of the proposal follows the launching of a public annuity scheme that has received a good response from some of the city’s elderly. The annuity scheme, enabling 65-year-olds and above to invest between HK$50,000 and HK$1 million in exchange for a maximum monthly return of HK$5,300 for women and HK$5,800 for men for the rest of their lives, is an option for those seeking stable, safe returns from modest savings. However, that is just one element of a sound retirement policy.

The MPF remains the basic platform of self-financed retirement income for many. It needs to be reinforced by realistic contribution levels and competitive investment management. But first of all the government has to overcome likely employer resistance to higher contributions while it also tries to end the offset mechanism for financing severance and long-service payments. As in other schemes for senior citizens, such as silver iBonds and reverse mortgages, only those with some means to plan ahead benefit from public annuities. Retirement protection overall remains woefully inadequate. In the absence of a universal pension scheme, many are living on social security or relying on meagre savings and MPF earnings. In the long run, expansion of the MPF is one way to ensure that a decent standard of living after retirement is maintained. It is important to the stability of an ageing society.