MPF Reform: Patchwork Fixes Won’t Cut It?

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

As the saying goes, knock-offs are never good. Hong Kong’s MPF was supposedly modelled on Singapore — but missed the essence. Singapore has a central provident fund; Hong Kong got “forced savings”: neither here nor there. This “Kung Fu Tea” column was among the sharpest MPF reform voices of 2012. (Some characters in the original were corrupted and have been conservatively restored.)

What separates Hong Kong from Singapore?

Whether government shoulders responsibility. The real difference: Singapore’s government manages the funds and guarantees returns, so workers rest easy. Hong Kong’s government offloaded MPF to private financial institutions — high admin fees, low returns. Workers contribute on schedule only to toil for others, fattening fund managers.

How deep is the skim?

HK$7 billion a year in management fees. The bigger MPF grows, the fatter trustees and managers get — about HK$7 billion a year and rising. Most outrageous: BEA’s Japan Equity Fund, chaired by David Li, averaged -14% a year — invest HK$10,000, lose HK$1,400. Scared yet?

What did the author propose?

Two options: copy Singapore, or go universal. One: a central provident fund run by government or the HKMA, cutting fees with guaranteed returns. Two: study universal retirement protection urgently, using MPF as transition. Chief Secretary Carrie Lam had just promised to study it — hopefully more than lip service.

What is the lesson from 2012?

“Semi-portability is rearranging deck chairs” — 2012’s gloomiest prediction didn’t fully come true, but deserves remembering. Switching rights did give workers leverage, and fees did fall. Yet the structural critique — flawed at birth, malnourished since — is still heard today. MPF reform was never about changing the soup or the recipe. It’s about who controls the stove.