The MPF offsetting mechanism: a 2011 lawmaker called it the scheme’s unfair flaw

In October 2011, as the Legislative Council reconvened for a new session, a labour-sector lawmaker took to the press to press workers’ case. His target: the MPF system covering more than three million employees — and two flaws he said were eating away its promise as retirement protection, the offsetting mechanism and opaque trustee fees.

What is the MPF offsetting mechanism?

The MPF offsetting mechanism allows an employer to use the accrued benefits from its MPF contributions for an employee to offset severance payments or long service payments owed to that employee. In 2011, a labour-sector lawmaker called the mechanism grossly unfair: an employee unfortunate enough to be laid off several times could see the offsetting wipe out almost all of their MPF, stripping the scheme of its retirement-protection purpose.

How did fees eat into returns?

The lawmaker also charged that trustee fees lacked transparency and could quietly erode MPF gains. After more than a decade of accumulation, ordinary employees had built balances of tens of thousands to over a hundred thousand dollars — yet with opaque fee structures, members had no way to tell how much of their return was being eaten away.

Should section 43C protection be widened?

His other demand concerned section 43C of the Employment Ordinance, which then required only construction-industry principal contractors to cover two months of unpaid wages when workers were left unpaid. With subcontracting spreading to security, cleaning, catering, hotels and clerical work, he urged the government to extend the protection to all industries.

For the basics of MPF fees, see the MPF education hub.