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MPFA on the Research Report on Future Development of Retirement Protection in Hong Kong

In response to Government’s release of the Research Report on Future Development of Retirement Protection in Hong Kong, the Mandatory Provident Fund Schemes Authority (MPFA) issued the following statement:
 
The MPFA welcomes the release of the Research Report which provides a good start for a public discussion about the extent to which public funds should be used to meet the retirement needs of the population, how any commitment of public funds should be financed, and how the different pillars of retirement protection should interact.
 
The retirement protection system in Hong Kong is based on the multi-pillar model1 recommended by the World Bank. Each pillar has a different objective, is funded in a different manner, but complementary to the others.
 
The MPF System is the “second pillar” which is designed to help the working population accumulate retirement savings, funded by their own, and their employers’, contributions.
 
The MPFA notes that some of the proposed options involve the transfer of MPF contributions. Whilst the details would have to be worked out, the MPFA considers that careful consideration would need to be given to such a transfer as
  • it is tantamount to transferring individual private savings to public resources;
  • it would have a detrimental impact on how much members can accrue through the MPF System; and
  • depending on how the transfer would be implemented, it may affect the contractual relationship between employers and employees.
As the Chief Secretary for Administration, Mrs Carrie Lam, and the Research Report rightly pointed out, such a transfer would seriously affect the operation of the MPF System. Any retirement protection system which would undermine the effectiveness of the MPF System would be both inadvisable and retrogressive.
 
Regardless of which option Hong Kong adopts in the end, the MPF System should continue to play a vital role in helping members of the working population accumulate savings for their retirement and the MPFA will continue to work on reforming and improving the System.
 
- Ends -

20 August 2014


1The World Bank originally proposed a three-pillar framework which was later extended to a five-pillar framework. The five pillars are
  • a publicly financed non-contributory “zero pillar” (e.g. basic or social pensions, universal or means-tested);
  • a publicly financed mandatory “first pillar” with contributions linked to earnings;
  • a mandatory occupational “second pillar” that is typically a defined contribution plan;
  • a voluntary occupational “third pillar”; and
  • a non-financial “fourth pillar” which includes access to informal support such as family and formal social programmes such as medical care.
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