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SCMP Editorial

People have long complained their mandatory pensions will never be enough to retire on. That is true, but the flip side is that by contributing less than many comparable pension schemes overseas, local workers have more spending power in the present. There is always a trade-off.
Perhaps the Mandatory Provident Fund (MPF) scheme should be seen more as a financial cushion for a person at the end of their working life, rather than a nest egg. Still, the scheme needs to continue to keep up with, or at least not lag too far behind, the inflation-driven cost of living in Hong Kong.
The current minimum and maximum income levels for contributions – HK$7,100 (US$907) and HK$30,000 – have not been adjusted since the 2013-14 financial year.
MPF authority chairwoman Ayesha Macpherson Lau said the body had been consulting stakeholders and proposed raising the minimum and maximum contribution levels.
That is reasonable and likely necessary. Even so, there is room for discussion as to how much the increases should be. Most bosses will not like it, but people should not assume employees will want to pay more into their pensions either.
Currently, workers earning less than HK$7,100 a month are exempt from making contributions but employers still have to contribute their 5 per cent portion. Mandatory contributions for those making more than HK$30,000 are capped at HK$1,500, or 5 per cent of HK$30,000. People can, of course, put more into their pension, but their employer is not required to match it beyond HK$1,500.
The MPF authority has proposed increasing the minimum and maximum to HK$10,000 and HK$40,000, which will mean raising the employer’s payment to up to HK$2,000 a month. That will be 33 per cent more than the current level, or an extra HK$500 from both sides.
It is a reasonable proposal. Consumer prices jumped by 21.5 per cent from 2014 to 2024. The median monthly household income rose by 30 per cent to HK$30,000 from HK$23,200 during the same period.
Industry representatives in the legislature have cautioned that the proposed increase would raise the financial burden on employers and that changes should be made prudently. Employers, of course, don’t want to pay more than necessary. Slowing growth in China and an uncertain economic outlook in the global economy justify caution. However, workers’ welfare also needs protection and periodic improvement based on economic circumstances.
Raising contribution levels is necessary after more than a decade. Stakeholders can work towards a consensus with the MPF authority, with government officials playing a constructive mediation role.


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Raising MPF contribution levels a tricky but necessary step for Hong Kong

People crossing the street in Central. The Mandatory Provident Fund Authority has proposed raising contributions into the city’s pension fund for the first time in 13 years. Photo: Edmond So

MPF payments may rise 33% to HK$2,000 a month under first change in 13 years

Hong Kong’s MPF regulator is considering income thresholds after fresh consultations. Photo: Sun Yeung

Ayesha Macpherson Lau, chairwoman of the Mandatory Provident Fund Authority. Photo: Edmond So

Proposed 33% rise in MPF payments ‘may pile on business pressure, hit jobs’

More than 2.6 million employees are registered under MPF schemes. Photo: Dickson Lee

Opinion

Increasing the amount workers and employers contribute is likely warranted, but there is room for dialogue on how large the increase should be


Increasing the amount workers and employers contribute is likely warranted, but there is room for dialogue on how large the increase should be.


Mandatory Provident Fund (MPF)

Banking & finance

Hong Kong

Ayesha Macpherson Lau

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Editorial

Raising MPF contribution levels a tricky but necessary step for Hong Kong

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Increasing the amount workers and employers contribute is likely warranted, but there is room for dialogue on how large the increase should be

Increasing the amount workers and employers contribute is likely warranted, but there is room for dialogue on how large the increase should be