Critical Illness May Unlock Early MPF Access; Phased Withdrawals After 65 Under Study

With global markets in turmoil, forcing employees to cash out their MPF in one lump sum at 65 risks a painful “shrinkage” if markets turn just before retirement. In 2011, an MPFA working group studied two ideas: a narrow MPF early withdrawal for critically or chronically ill workers to cover heavy medical bills, and letting over-65 members take benefits in stages to soften market swings.

When is MPF early withdrawal allowed?

Under the working group’s 2011 thinking, early access would be narrowly drawn. The group leaned towards allowing MPF early withdrawal only for employees with critical illnesses or chronic conditions facing heavy medical bills; buying a flat, children’s overseas education, family emergencies and unemployment drew reservations, lest compassionate exceptions defeat MPF’s retirement purpose.

The government reminded the MPFA that opening too many compassionate grounds could contradict MPF’s purpose as provision for retirement.

Phased withdrawals after 65

The other proposal: members turning 65 should not have to take everything at once. The group suggested phased, proportional withdrawals — the cap to be discussed — so retirees would not be forced to liquidate everything when markets were down.

Next steps: consultation and legislation

The progress report, with its analysis and public views, went to the board for a decision; the group proposed a public consultation by end-2011, followed by legislative amendments tabled for LegCo scrutiny, aiming for implementation in the next legislative year.

For the statutory conditions on MPF withdrawal, see the MPF education hub.