EditorialNo cause to celebrate as failed MPF scheme marks 20 pitiful years

The only winners to come out of Hong Kong’s pension plan are fund managers and bosses, not the workers whose meagre returns mean they cannot afford a dignified post-retirement life

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Hong Kong’s Mandatory Pension Fund covers some 4.5 million workers in the city. Photo: Martin Chan

Published: 9:00pm, 2 Dec 2020Updated: 11:30pm, 2 Dec 2020

Celebrations marking the 20th anniversary of the Mandatory Provident Fund, Hong Kong’s pension scheme, are muted. It is not that much closer to financing a decent retirement for all than it was on day one in December 2000. Retirees are the losers. The real winners are fund managers who have enjoyed a lucrative flow of fees from the start, and bosses entitled to fund employee severance entitlements by clawing back their MPF contributions, at the expense of the vision of a dignified post-retirement life for their workers.

It is a deeply flawed vision. Hong Kong is ageing fast. In the next five years about 450,000 of us will join the ranks of the retired. We are living longer and in good health, but ultimately frailty prevails. Too many will lack a significant degree of financial independence. The government – and financially that means everyone still in the workforce – will have to foot a rising bill for income maintenance, and ballooning social welfare such as elderly care and ever more expensive advanced medical treatment. The MPF’s shortcomings after 20 years stand to be magnified in another 20. Right now it is not fit for purpose – about the worst thing that can be said about a universal retirement scheme.

Retirement and aged support could become an issue for the city’s financial stability. The most immediate and quickest fix – or beginning of a fix – would be to scrap the mechanism that allows employers to sack someone and take back their MPF contributions. The government has put talks about this with business on hold for further study. This issue does not require further study. It calls for a greater sense of urgency from the government about remedying it. For highly paid and comfortably pensioned officials to look so out of touch with ordinary people who have contributed to Hong Kong’s development over the decades is regrettable. It is also a distraction from the main issue in the longer term.

The MPF is hopelessly underfunded by employer and employee contributions. The appropriate rates vary in different countries according to other social support, tax policies and so on. The government needs to think outside the box if necessary about how it can ensure decent retirement for the city’s ageing population. It is both a social and political issue. Too few people feel safe after retirement in relying on the MPF, particularly blue-collar workers. Even the middle class need to supplement it with their own investments, which entail risk.

Twenty years ought to be time enough for a universal pension scheme to establish itself as a core element of a viable retirement policy. The MPF does no credit to a wealthy society. The government needs to recognise that, as it stands, it is part of the problem – not the solution – and address it seriously.

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;} The only winners to come out of Hong Kong’s pension plan are fund managers and bosses, not the workers whose meagre returns mean they cannot afford a dignified post-retirement life

The only winners to come out of Hong Kong’s pension plan are fund managers and bosses, not the workers whose meagre returns mean they cannot afford a dignified post-retirement life