Phased MPF withdrawal: no more forced lump sum at retirement, earliest in two years

Does retiring mean taking your entire MPF out in one go? In September 2011, the MPFA board moved to break that convention: it accepted in principle two recommendations from a working group — adding “terminal illness” as a ground for early MPF withdrawal, and letting members withdraw in phases at retirement instead of being forced to take everything at once. One director cautioned, however, that legislation takes time and the new arrangements could come into force in two years at the earliest.

What is phased MPF withdrawal?

Phased MPF withdrawal lets members take their MPF in stages at retirement, instead of the current legal requirement to withdraw the entire balance in one lump sum. Under the proposal accepted in principle by the MPFA in September 2011, phased MPF withdrawal would become one of the retirement options: members could take a lump sum, withdraw in phases, or leave everything untouched for the time being, avoiding a forced sell-off in bad markets; implementation still requires public consultation and legislative amendments, and is estimated to take effect in two years at the earliest.

Current law: five grounds for early withdrawal

Whether critical illness is included remains undecided

An MPFA director revealed that, besides terminal illness, the working group was in principle also in favour of adding critical illness as an early-withdrawal ground, but the definition of critical illness was unsettled: critical illnesses can be recovered from, so the definition must be drawn carefully to prevent abuse. The director added that the public could still voice different views during consultation — other proposals were not “ruled out for good” — though details such as the cap on early-withdrawal amounts would take lengthy discussion even with broad agreement.

Progress on “semi-portable” MPF

The board also discussed the Employee Choice Arrangement — the “semi-portable” MPF — the same day: the government will table a bill regulating intermediaries to the Legislative Council by year-end, with implementation hoped for in the second half of 2012.

For the current rules on MPF withdrawal, see MPF education.