Retirement Schemes Association Urges Early Employee Choice Arrangement, End to MPF Offsetting

The Hong Kong Retirement Schemes Association has submitted MPF reform proposals to the government, urging early implementation of the Employee Choice Arrangement (MPF semi-liberalisation) to bring in more member schemes, sharpen competition and create room for fee cuts. It also advocates MPF offsetting abolition — ending the use of MPF contributions to offset long-service and severance payments.

What exactly does the Association propose?

Early ECA, higher contributions, more tax incentives, and an end to offsetting. The Association’s Lau Ka-shi said the proposals went to the Financial Services and Treasury Bureau and the MPFA. Beyond early semi-liberalisation, it recommends raising mandatory contributions, expanding tax incentives for voluntary contributions, scrapping MPF offsetting of long-service and severance payments, and using electronic platforms and low-cost funds to cut expenses.

Why abolish the offsetting mechanism?

Offsetting guts employees’ retirement savings. Current law lets employers use the employer-contribution portion of MPF accruals to offset severance and long-service payments. The longer and more loyally someone works, the more gets offset away — leaving little at retirement. The Association argues only abolition honours MPF’s purpose as retirement protection.

What’s good about the Employee Choice Arrangement?

Competition that should push fees down. Once ECA launches, employees can annually move their mandatory employee-contribution accruals to a scheme of their choice instead of being stuck with their employer’s pick. The Association believes more member schemes competing will create better conditions for fee reductions.

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