MPF reform proposal: chief executive hopeful floats HKMA-run top-up accounts

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

Editor’s note: a garbled character in the original (“?豐”) has been reconstructed as HSBC (滙豐) from the context of “market leader”.

Hong Kong’s 2012 chief executive race turned the MPF into a policy battleground. A chief executive candidate proposed opening extra MPF contribution accounts at the Hong Kong Monetary Authority, a move an MPFA non-executive director called workable. Together with the Employee Choice Arrangement due that November, the two ideas would cover HK$238.5 billion.

Why would the HKMA manage MPF contributions?

The MPFA non-executive director argued that the HKMA has deep investment experience and that the Exchange Fund it manages plays a steady, conservative game well suited to retirement savings. After meeting the candidate on 13 February 2012, he said the proposal was feasible and urged extending it to employees so more members would benefit.

How does this relate to the Employee Choice Arrangement?

The Employee Choice Arrangement, nicknamed “semi-portability”, was expected to let employees move their contributions to a trustee of their choice from November 2012. If both the HKMA accounts and the arrangement went ahead, the sums involved would reach HK$238.5 billion, a major shake-up of the system.

How did the industry react?

The market-leading bank endorsed encouraging early retirement saving and said open, fair competition benefits contributors, but whether the HKMA should invest the money depends on execution and public acceptance. The chief executive of the fourth-ranked trustee warned that MPF administration is the cumbersome part, and handing it to the HKMA could require a new trustee and extra headcount.

For a primer on how the MPF system works, see the MPF education hub.