MPF reform debate: the 12-point review motion tabled in Legco in November 2011

On 2 November 2011, Legco debated two motions touching workers’ wallets on the same day — one on easing the middle-class burden, the other a full review of MPF. The latter, moved by 譚耀宗, packed 12 reform proposals into a single motion: from full portability of MPF benefits and fee caps to tax deductions for voluntary contributions, putting a decade of member grievances on the chamber floor at once.

What did the 2011 MPF reform motion propose?

The MPF reform motion called on the government to comprehensively review the MPF system after more than a decade in operation, with 12 proposals including implementing full MPF portability, legislating fee caps by fund type, switching trustees to flat administration fees, offering fee-free bank-savings products, launching government-run funds linked to Exchange Fund and inflation returns, allowing contribution holidays for critical illness, phased withdrawals after 65, a $12,000 tax deduction for voluntary contributions, and a review of the offsetting mechanism.

The 12 MPF reform proposals at a glance

譚耀宗’s motion argued that after 10+ years of MPF, the many improvement suggestions from the community demanded a full review, aimed at lower fees, more investment choice for employees and better regulation. The 12 proposals were:

1. Implement full MPF portability as soon as possible
2. Push trustees to cut fees, e.g. legislate fee caps and fee categories by fund type
3. Require trustees to charge a flat administration fee instead of a fixed percentage of account assets
4. Require trustees to offer bank-savings-style products charging no management fee
5. Add government-run, low-fee funds linked to Exchange Fund returns and to inflation
6. Study trustees’ operating cost data and regulate them with reference to the labour-insurance model
7. Require trustees to state actual fees collected for the year in annual reports
8. Allow members with special reasons (e.g. critical illness) to suspend contributions or withdraw part of their accrued benefits in emergencies
9. Allow retirees to draw accrued benefits in phases after age 65
10. Create a tax deduction of up to $12,000 for MPF voluntary contributions
11. Push the Labour Advisory Board to discuss the offsetting mechanism between employer contributions and severance/long-service payments
12. Tighten regulation of intermediaries, step up enforcement and raise penalties against contribution defaults

葉偉明, 陳健波, 涂謹申, 李鳳英 and 梁家傑 were to move amendments to the motion.

Why did full portability top the list?

Full portability led the 12 points for a reason. At the time, “semi-portability” (the Employee Choice Arrangement) was already on its way, expected in 2012, letting employees move only their own contributions’ benefits; full portability was the next step — letting employees move the employer-contribution portion too, genuinely returning choice from employers to employees. To compare trustees’ fund performance and fees before choosing, members could use MPF fund comparison.

MPF tax deduction: the voluntary-contribution proposal

Notably, both motions converged on the same figure: item (4) of 劉江華’s middle-class motion and item (9) of 譚耀宗’s MPF motion both proposed a tax deduction of up to $12,000 for MPF voluntary contributions. The same proposal appearing in motions from different camps showed that encouraging people to contribute more was already cross-party consensus in 2011.

Why does the offsetting mechanism keep coming back?

Item (10) asked only for the Labour Advisory Board to “discuss” the offsetting mechanism — under which employers offset severance or long-service payments against the employer-contribution portion of MPF. Labour groups had long attacked it as making employees “contribute for nothing”, while business opposed abolition; the motion dared not even name a legislative timetable, a measure of how contested it was. For fee structures across fund types, see the MPF education hub.