Better retirement protection
Updated: 2015-10-13 08:47
(HK Edition)
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The business community once again voiced its vehement opposition on Monday to the proposal to abandon the existing offsetting mechanism of the Mandatory Provident Fund (MPF). Under this mechanism, employers are allowed to use their portion of MPF contributions to offset the long-service or severance payments due to an employee.
The idea to gradually revoke the mechanism was raised in Chief Executive Leung Chun-ying's platform when he ran for CE in 2012. There has been talk lately that the CE will announce the end of this mechanism in his Policy Address in January, but there will be no backdating for the new system.
The original idea of the MPF is for employees to save a portion of their salary on a regular basis to prevent them from spending all their income and ensuring there is money to support their retirement. Many people, for various reasons, are unable to do the saving part and the MPF is supposed to do it for them.
However, the current offset mechanism, as many argue, defeats this purpose by indirectly allowing the employee to withdraw money from the saving for his future, not to say that employers are paying severance payments from the employees' own pockets.
Hong Kong's MPF is far from perfect. It has long been criticized for the low returns on the fund's investment and for providing insufficient retirement protection for workers. But it does help a retiree to some degree to reduce the risk of using up their resources. The unions have been campaigning for the repeal of this offset mechanism for years, and now perhaps the CE is answering the labor sector's call.
The business community, on the other hand, has its own concerns. In their opinion, long-service and severance payments pose a heavy financial burden on small and medium enterprises. Giving up the offset mechanism is tantamount to asking employers to provide double benefits to employees.
The business community also feels that the SAR government is eating its words. This is because the offset mechanism is what the administration offered to persuade them to accept the MPF in the first place. It has also pointed out that the labor sector accepted the mechanism when the MPF was first launched.
It is important that consensus is developed before any changes are made. But no matter whether the mechanism is to stay or go, the MPF itself has to be revamped. This is to make sure our futures are better protected.
(HK Edition 10/13/2015 page9)