16 January 2019
The Mandatory Provident Fund Schemes Authority's proposal for a new contribution adjustment mechanism drew a wave of opposition. Photo: HKEJ
The Mandatory Provident Fund Schemes Authority's proposal for a new contribution adjustment mechanism drew a wave of opposition. Photo: HKEJ

Taxpayer group likens proposed MPF changes to robbing workers

The Mandatory Provident Fund Schemes Authority (MPFSA) wrapped up last Friday its six-week public consultation on a proposed automatic mechanism for adjusting member contributions to the pension fund.

The proposal drew a wave of opposition from various quarters. Momentum 107, a local taxpayers’ organization, likened the proposed changes to “robbing the working population”.

The authority said it received some 25,000 comments on Friday alone, and over 30,000 during the whole consultation period. It can be assumed that most of them opposed the changes.

Under the existing adjustment mechanism, employees with monthly income less than HK$7,100 are not required to make contributions to the MPF, while those with income above HK$30,000 must contribute a maximum of HK$1,500 to the fund.

The thresholds and amounts of contribution are reviewed every four years, according to the current ordinance.

Under the automatic mechanism proposed by the MPFSA, any changes to MPF contributions can be done automatically and the revision period will be shortened to once every two years.

The proposal is similar to the fare adjustment mechanism implemented by the MTR Corporation (00066.HK). Members’ contribution level can be changed according to the automatic mechanism, which will take into consideration the monthly median income of all employees in the city.

Approval from the Legislative Council of the changes will no longer be needed.

If the proposed mechanism is implemented today, employees making more than HK$8,300 will have to contribute to the MPF. And the maximum contribution will go up to HK$1,750 a month.

The rationale for setting up the MPF is to make sure employed individuals set aside a certain amount from their monthly income as retirement savings.

The main reason why most people hate putting more money into the pension fund is its track record of low returns, high administrative fees and inflexibility.

Many people like to compare the MPF with the Singapore Central Provident Fund (CPF).

Unlike the MPF which could experience losses in adverse market conditions, the CPF earns a minimum risk-free interest of 2.5 percent guaranteed by the government.

Also, the Singaporean scheme allows contributors to draw from the fund which they could use as part of the down payment to acquire their own homes.

Although this option cuts both ways, depending on whether the property market is already too expensive, it is after all a more flexible arrangement.

But Hong Kong people do not have that choice.

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EJ Insight writer

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