MPF early withdrawal and phased payouts: MPFA’s 3-month consultation

Over a Winter Solstice dinner, an uncle three years from turning 65 asked: “I hear the MPFA is proposing that retirees be allowed to draw MPF in instalments — is that right?” The answer: yes. The MPFA was consulting the public on withdrawal arrangements, with the consultation running from December 2011 to 31 March 2012 — three months in total.

What did the MPF early withdrawal consultation propose?

The MPFA proposed giving retired members a flexible choice between lump-sum and phased MPF withdrawals, and adding “terminal illness” — a certified life-threatening illness — as a new ground for early withdrawal. Phased withdrawals would let members manage their retirement benefits around personal preferences, risk tolerance and other retirement resources, while nudging the industry to develop retirement-income products whose competition would keep fees reasonable.

The two proposals at a glance

Why only terminal illness?

The uncle pressed further: some had argued for loosening early-withdrawal limits more broadly — why add just one ground? Because MPF exists to help the working population build retirement savings: contribution rates are modest and capped by a maximum relevant income level. If a member is certified terminally ill, saving for life after 65 has lost its meaning, and keeping MPF locked for retirement protection may no longer matter. Using MPF to fund home purchases or children’s education, the MPFA argued, is simply not workable. Members could submit views to the MPFA during the consultation period.