Update | Hong Kong regulator calls for rethink of MPF offset
Authority stops short of saying mechanism should be scrapped but backs studies looking at increasing contributions to retirement fund
The regulator of Hong Kong’s MPF pension system has for the first time called for a rethink of the notorious mechanism that allows employers to use the money they put into workers’ retirement funds to cover their severance and long-service payments.
Instead, it angered both business and labour groups by suggesting it was time to explore whether the amount both parties contribute to pension funds should be raised.
“We are not a policy-making body. It is not our mandate to try to come up with policy changes to address the issue of offsetting,” authority chairman Dr David Wong Yau-kar said. “We notice that this problem exists and we are very concerned.”
“We notice that this problem exists and we are very concerned,”
In Hong Kong, companies and employees are both required by law to contribute an amount equal to 5 per cent of an employee’s monthly wages to his or her MPF account. The contribution is capped at HK$1,500 per month. The system is a source of constant friction between companies and labour unions.
In 2015, the total amount of employers’ contributions used to offset employees’ long-service and severance payments was HK$3.35 billion, up 11.5 per cent from 2014.
Wong said he was “delighted” many people had floated different ideas and that a lot of them were “quite positive and promising”.
He first refused to comment on proposals from academics for the offsetting mechanism to be scrapped in phases. But he later mentioned, without endorsing it, one of the suggestions that the government set up an unemployment subsidy scheme. Sacked workers would be compensated by the scheme while looking for a new job. Long-service and severance payments would be scrapped under this proposal.
Wong also said many people did not consider it enough for employers and workers to contribute a total of 10 per cent. While he did not suggest directly that the rate should be raised, he said he was in favour of conducting studies on the issue.
Labour Party lawmaker Lee Cheuk-yan was outraged that the authority would only say the mechanism was an issue that should be “addressed”. He said increasing the contribution rate would give the government an excuse not to adopt a universal retirement scheme.
A government spokesman said: “We are glad to note that the MPFA shares the basic policy directions set out in the consultation that Hong Kong should continue to adopt the multi-pillar retirement protection model and that the MPF as one of the key pillars should be strengthened.”
