Terminal illness and MPF early withdrawal: the 2011 consultation explained

On 7 October 2011, MPFA chairman Anna Wu announced that the authority would launch a public consultation the following month on early withdrawal of MPF contributions. The preliminary leaning: only the terminally ill would be allowed to take back a portion of their contributions early, so as not to defeat the MPF’s purpose as retirement protection. The definition of terminal illness and the withdrawable proportion were still to be worked out.

What is MPF early withdrawal?

MPF early withdrawal means members taking accrued benefits before age 65 on exceptional grounds — here, a 2011 proposal for the terminally ill. The MPFA’s preliminary position was to permit it only for terminally ill patients, and only for a proportion of contributions, so the scheme’s retirement-protection purpose would stand — with the definition and proportion left to public consultation.

Employee choice arrangement targeted for second half of 2012

The MPFA also expected the Employee Choice Arrangement — the “semi-portable” MPF — to take effect in the second half of 2012. Once the legislative amendments were in place and an electronic data-exchange platform with MPF providers was built, the authority would have enough information to write to workers holding more than one MPF account, reminding them to consolidate.

Anna Wu said the MPF system had achieved solid results in its first decade: the share of the working population covered by retirement schemes had risen to nearly 90%, and the average fund expense ratio had fallen 13% over three years. As of June 2011, the MPF had generated HK$90.4 billion in returns — more than HK$100,000 per person on average. But she cautioned that the MPF alone could not support workers’ retirement; the government needed a comprehensive review alongside other policies to secure post-retirement living standards.

Reviewing whether fund charges are too high

MPFA chief executive Diana Chan said the authority was engaging a consultancy to study whether the charges levied by Hong Kong’s 19 MPF providers were excessive, with the assessment methodology expected to be finalised within months.

September markets: a second straight monthly loss

Meanwhile, Hong Kong MPF funds lost money for a second consecutive month: after August’s 6% fall, September brought a further 7.7% loss, for a cumulative 14% drop over the two months. Equity funds remained the worst performers, down 12% in September — China and Greater China equity funds fell 18%, Hong Kong equity funds 15%. Japan equity funds, down 2%, were the best of the group; mixed-asset funds fell 7% and bond funds 2%, dragged by weak global bond funds, while Hong Kong-dollar bond funds eked out a 0.3% gain.