‘Scrap MPF offset mechanism now or expect no change in Hong Kong status quo’
Sources tell Post new administration to face range of pressing issues when it takes office July 1
Failure to scrap Hong Kong’s controversial pension fund offsetting mechanism before the current administration ends its term on June 30 wouldlikely see the present system staying in place for years to come, as the next leader would be too busy handling other pressing issues, sources said.
“If the debate is to continue, this issue could be dragged on for two to three more years and we still won’t see a result ... the next administration may not be able to secure legislative approval until the middle of its [five-year] term.”
Last year, HK$3.85 billion was offset by employers – up a staggering 70 per cent from HK$2.27 billion in 2012.
But the business sector was up in arms. It came up with its own proposal to contribute an additional 1 per cent of monthly staff wages to MPF accounts on top of the 5 per cent employers were already contributing. The government would have to match the contribution.
The government has the responsibility to finish what it started
Last Thursday, at a special meeting of the Executive Council, Leung’s de facto cabinet, members failed to find agreement on the issue.
The sources believed lawmakers would realise it was a “political reality” – namely, they would conclude that ending the mechanism was better than preserving the status quo.
“If we don’t take a step forward, we will just be wasting our time,” one of the sources said.
The sources added that if the business sector’s proposal were adopted, the government would be aware it would not help employees at all as employers would have more money to use for offsetting.
They cited official statistics showing that about HK$90,000 would be offset on average for each offsetting by an employer. As the government has pledged to subsidise the payments, additional expenses borne by employers would be viewed as acceptable.
If the offset mechanism were scrapped, the government would collect HK$18 billion less tax over a 10-year period, the sources added. Taken together with the HK$7.9 billion subsidy, the price tag for the government would total HK$25.9 billion.
With respect to criticism that Leung appeared to be rushing to secure Exco’s passage with just two weeks left in his administration’s term, the sources said it took the government years to collect and analyse the relevant statistics.
“The government has the responsibility to finish what it started,” one said.
Unionist Chau Siu-chung, a member of the Labour Advisory Board that comprises both labour and business representatives, opposes the government’s proposal, arguing it has diluted how long service and severance payments are calculated.
At present, long service and severance payments are calculated by taking two-thirds of a person’s last monthly salary and multiplying it by his or her years of service. Under the government’s plan, the two-thirds base would be lowered to just half, but the employee would also get to keep his or her entire MPF.
“I don’t think there is room for negotiation,” Chau said.
