Changes to Hong Kong MPF pension scheme would mean half a million workers paying more into funds
Business leaders voice disapproval at scale – and timing – of rise to contribution cap on government-mandated scheme
Half a million Hong Kong workers, and their bosses, will be forced to contribute more money to staff pension funds under proposed new rules, triggering an outcry from business leaders.
The increase could be as much as HK$900 (US$115) per month.
While the Mandatory Provident Fund (MPF) contribution rate will stay at 5 per cent, the cap on the cash value of that contribution will rise under the plan from HK$1,500 a month to HK$2,400.
Under that set-up, some of the city’s better-off workers would sink HK$900 more into the fund each month, to be withdrawn when they reach 65 years of age.
“The Mandatory Provident Fund Schemes Authority (MPFA) has already submitted the proposal to the government,” a source with direct knowledge of the matter said on Thursday. “If adopted, it will be implemented in two phases.”
All employees must pay 5 per cent of their monthly salary into the government-mandated fund, the cash value capped at HK$1,500, an amount that people pay when they earn HK$30,000 per month. Workers who make less than HK$7,100 a month are exempt.
Hong Kong law requires employers to match workers’ contributions.
Under the MPFA’s proposal, the HK$7,100 exemption threshold would rise to HK$8,250. The HK$30,000 threshold would also rise, by 60 per cent to HK$48,000. As the 5 per cent contribution rate would remain, those who make HK$48,000 a month or more would need to make the higher HK$2,400 contribution.
About half a million people in Hong Kong make more than HK$30,000 a month, and so would be affected.
The threshold would first be adjusted to HK$39,000 and then to HK$48,000 two years later.
The source said a proposal was submitted to the government this month. If adopted, the amendments would need Legislative Council approval.
The amendments were proposed after taking into account the increase in wages over the years, the source added.
The most recent adjustments were in 2014, when the cap rose from HK$25,000.
The business sector erupted in anger at the news. Federation of Hong Kong Industries chairman Jimmy Kwok Chun-wah demanded that the proposal be suspended as the government was still dealing with another MPF change that will mean employers forking out more money for their staff.
He was referring to the government’s plan to stop employers from dipping into staff pension funds to offset severance and long-service payments.
“The two proposals are going to give businesses so much financial pressure. It’s not good timing to raise the MPF threshold,” Kwok said.
“I understand that the threshold needs to be adjusted some day, but first we need more details on how the authorities came up with the new level.”
Small and Medium Enterprises Association honorary life chairman Danny Lau Tat-pong said he did not understand why the threshold had to be revised upwards by 60 per cent. He noted that Hongkongers’ wages had not gone up by that much over the years. The median monthly wage in the city rose 13.5 per cent to HK$16,800 from 2014 to 2017.
“It’s not just us, the bosses, who need to pour more money into the pension funds. The workers will see less money in their wallets too,” he added.
The source said: “The MPFA has taken into account the extra burden that bosses will face and that’s why it has proposed that the amendments be implemented in phases.”
And Lam Chun-sing, chairman of the Federation of Hong Kong and Kowloon Labour Unions, supported the proposal. He noted that poor workers would not be affected as they will still be making the same 5 per cent contribution to their pension funds.
“And the workers will get their money back after their retirement,” he added.
The MPFA said in a statement that a proposal had been submitted to the government, but did not reveal details of it.