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Mandatory Provident Fund (MPF)

‘More than HK$15 billion’ may be spent to scrap MPF offset mechanism, Hong Kong welfare chief says

Dr Law Chi-kwong says the plan to stop bosses’ from dipping into workers’ pension funds for severance and long-service payments is still pending and promises more help for lower-income families

PUBLISHED : Friday, 02 March, 2018, 8:04pm
UPDATED : Friday, 02 March, 2018, 11:33pm

The Hong Kong government could spend more than the HK$15 billion (US$1.9 billion) promised by the finance chief on a long-awaited plan preventing employers from dipping into workers’ pension funds for severance and long-service payments, Secretary for Labour and Welfare Law Chi-kwong said on Friday.

At a press conference, Law called the HK$15 billion to scrap the controversial Mandatory Provident Fund (MPF) offsetting mechanism a “ballpark figure”. The amount was mentioned by Financial Secretary Paul Chan Mo-po in his budget speech on Wednesday.

A proposal from the previous administration estimated that the move would cost HK$7.9 billion.

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Chan said the increased sum showed the government’s willingness to raise its financial commitment “to effect the abolition” of the mechanism. It would consult major stakeholders in coming up with a proposal acceptable to those involved as soon as possible, he added.

On Friday, Law said the government was still finalising its “preliminary proposal”. He said it took time to come up with a plan that would be acceptable to both employees and employers.

“There’s nothing holding back the government from making a decision on the cancellation of the offsetting mechanism,” Law said. “The details and the technical possibilities of different options we have to analyse will take time.”

There’s nothing holding back the government from making a decision on the cancellation of the mechanism
Law Chi-kwong, welfare chief

By the time the government came to a final decision, the funds needed to scrap the offsetting mechanism were likely to be even bigger, he said. “Of course, the HK$15 billion figure is today’s value. By the time the policy is implemented, I believe the amount could be much larger.”

The government said last year it would subsidise companies in paying long-service and severance payments for a decade, as it phased out the mechanism allowing employers to offset the payment with employees’ MPF.

According to the Mandatory Provident Fund Schemes Authority last year, some HK$31.8 billion was offset from workers’ MPF in a 15-year period.

Democratic Party lawmaker Andrew Wan Siu-kin said the act of raising the figure to scrap the mechanism might be perceived differently. “Since the government has proposed to subsidise companies, it may appear that it is using public resources to help such companies.”

It may appear that this is using public resources to help companies
Andrew Wan Siu-kin, lawmaker

The lawmaker also said the final cost could go up to HK$20 billion.

“If they are expecting a small increase, Law would not have made the comment,” he said.

He urged the government to consult employees and employers as soon as possible and consolidate a plan.

Meanwhile, amid a series of high-profile child abuse cases, Chan also announced that HK$504 million would be spent on a three-year pilot scheme to provide social work services to the families of pupils attending subsidised kindergartens in Hong Kong.

Law said the scheme would be implemented in phases, with one-third of some 760 kindergartens being included each year. By the end of the pilot scheme, the ratio of kindergarten pupils to school social workers should be 600:1, he said.

‘Scrap MPF offset mechanism now or expect no change in Hong Kong status quo’

There are about 150,000 children attending kindergartens in Hong Kong.

If the pilot scheme proves to be effective, the government will turn it into a permanent programme.

In the same press conference, Law refused to disclose more details on the short-term relief measure for “N-nothings” – those who earn too much to qualify for subsidised housing or welfare assistance but not enough to buy their own homes or benefit from tax breaks. The measure would be implemented by the Community Care Fund.

He said, however, that the relief, traditionally a one-time handout, could come in a different form to benefit more people.

The task force overseeing the fund will have a meeting in late March to discuss how to “fill the gap” and care for those who would not benefit from relief measures announced in the budget, Law said.