Filibuster stalls LegCo agenda, clouding November launch of employee choice

This article is a rewrite of a report from May 2012.

A Legislative Council bills committee meeting scheduled for the morning of 4 May 2012 was postponed after a filibuster, with no new date set. The market’s pressing question: will the employee choice arrangement — MPF “semi-portability” — still be approved before the summer recess and take effect on 1 November 2012 as planned? Any delay could postpone the long-awaited price war among trustees.

Why does the employee choice arrangement matter?

The employee choice arrangement, nicknamed MPF “semi-portability”, lets employees transfer the accrued benefits from their own mandatory contributions to a scheme of their choice once a year. If implemented, trustees are expected to start a price war: according to the MPFA website, the average fund expense ratio across all 525 MPF funds was 1.74 per cent including all charges, and the hope was that fees would eventually fall to about 1 per cent. For workers, it is a reform with only upside.

What is blocking the legislation?

The key is the bill regulating MPF intermediaries — the Mandatory Provident Fund Schemes (Amendment) Bill — which must pass its third reading before the current LegCo term ends on 18 July 2012. The complication is that the legislative agenda has been jammed by a filibuster, forcing the bills committee meeting to be postponed and putting a pre-summer decision on semi-portability in doubt. A Treasury Bureau deputy secretary had promised lawmakers at a late-April meeting that a final vote on the amendments would come in June.

What are the stakeholders saying?

An MPFA non-executive director, who was also a labour federation vice-chairman, frankly worried that unexpected human factors could prevent semi-portability from being approved before the term ended on 18 July, dashing hopes of forcing MPF fees down further. The chairman of the amendment bill’s committee, however, said he was still pushing for a June vote, believing the amendments were simple and opposition limited — though he admitted new complications in LegCo meant watching how things developed.

The chief executive of a trust company that had cut prices two years earlier said that if semi-portability stalled again, peers would likely hold their fire and pause the price war. A Financial Services and Treasury Bureau spokesman said scrutiny of the intermediaries bill was in its final stage, with meetings scheduled in May, and that the government and the MPFA would fully support the committee’s work — if the bill passed this legislative year, the employee choice arrangement could take effect on 1 November as planned.

A companion report (ID 2981) covers the same legislative logjam, from the angle of full portability being deferred to the following April at the earliest.