MPF’s Mess Holds a Lesson for the Old Age Allowance Debate

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

MPF and the Old Age Living Allowance both decide how retirees live. November 1, 2012’s MPF semi-portability was a fix for a design flaw — a flaw born of inadequate deliberation. With universal retirement protection fiercely debated, MPF’s lesson deserves heeding: no populist policymaking, or society pays dearly.

Why call MPF a product of political prejudice?

The central provident fund was rejected because it “couldn’t be controlled by the communists”. Hong Kong debated retirement security from the 1960s; by the 1990s two models remained: privately managed mandatory contributions (MPF) and a central provident fund. The colonial government chose MPF — reportedly not on principle, but because an Executive Council member privately said a central fund’s vast roll-up “couldn’t be controlled by the communists”. One wrong decision, millions of workers harmed.

How angry were workers?

Low returns, fees eating their savings. Eleven years in, public fury showed when the budget injected HK$6,000 into every MPF account — citizens saw it as a handout to trustees. On roughly HK$390 billion in assets at a 1.74% average fee, trustees collected billions yearly. MPF failed to secure retirements; it became the golden goose for trustees and fund managers.

What was semi-portability?

A patch: move your own contributions once a year. From November 2012, employees could annually shift their own contributions in one go from the employer’s trustee to a chosen account — competition to force fees down. The remedy itself proved the original design was undercooked.

What does it mean for the allowance debate?

Don’t pile populism on populism. Looking from MPF to the Old Age Living Allowance’s means-test row, the unease is real: a bad policy’s damage runs deep. Parties bidding up benefits for votes spend tomorrow’s money today.

What is the lesson from 2012?

Retirement security cannot be improvised. The 2012 editorial’s verdict was blunt: MPF was prejudice plus hasty design, still being patched a decade later. Old-age allowances, universal pensions — don’t fall into the same pit twice.