Hong Kong’s controversial Mandatory Provident Fund (MPF) offsetting mechanism will be scrapped, Chief Executive Carrie Lam announced on Wednesday in her policy address.
The mechanism allows employers to dip into workers’ pension funds to make long-service and severance payments, a system which has come under fire for years from unions and fundholders themselves.
The offsetting will be fully scrapped as early as 2025, when the launch of an electronic management platform for the MPF (eMPF) is completed.
According to a government source, the administration will provide subsidies for a 25-year period to small and medium-sized companies to help cover some of the extra costs.
Lam said the amendments would be sent to the Legislative Council in the next legislative year. The chief executive also said the government is looking into ways to encourage citizens to convert their pensions scheme into annuities.
“We will further explore ways to better encourage the public to convert their one-off assets under the MPF into an annuity which they can receive on a regular basis after retirement,” the policy address said. The aim was to provide a steady income stream for the elderly rather than a lump sum.
‘Resolute’ action?
Michael Luk, lawmaker from the pro-Beijing Hong Kong Federation of Trade Union (HKFTU), said he was dissatisfied with the government’s years of repeated promises to scrap the mechanism.
“[The government] used the term ‘resolute’ to describe how they will cancel the MPF offsetting mechanism. But how ‘resolute’ is it? It’s been a painfully long wait,” Luk said. “We hope the government will offer a specific plan as soon as the next legislative year begins.”
Meanwhile Wong Kwok-kin, also of HKFTU, said he won’t criticise the government’s plan to turn MPFs into annuity schemes, but it would be preferable if the switch was made optional, not mandatory.
Lam first proposed the abolition of the MPF offsetting mechanism in 2018 but business groups had strongly resisted the move.
policy address 2021
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