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On the launch of the public consultation on retirement protection by the Commission on Poverty today (22 December), the Mandatory Provident Fund Schemes Authority (MPFA) has the following response:

1. The MPFA welcomes the launch of the consultation, and is pleased that the consultation paper recognizes the important role played by the Mandatory Provident Fund (MPF) System in the entire retirement protection framework, and that when the System matures, its function to provide retirement protection can hardly be taken up by other pillars of the framework.
    
2. The MPFA also welcomes the Commission on Poverty in agreeing to the adoption of following strategies by the Government and the MPFA to strengthen the MPF System:

• Launching the Default Investment Strategy in 2016;
• Stepping up publicity efforts to broaden the employees’ understanding and acceptance of the MPF System;
• Putting in place a centralized electronic portal to facilitate the standardization, streamlining and automation of the MPF scheme administration; and
• Implementing full portability in the long run. 
   

3. The consultation paper mentions various suggestions, including exploring the feasibility of raising the MPF contribution rate at an opportune time and considering the provision of tax concessions to incentivise people to increase voluntary retirement savings. The MPFA believes that these policy suggestions are in the right direction. Increasing the contribution rate and the amount of voluntary contributions would help the MPF System provide scheme members with stronger retirement protection.
    
4. The consultation also touches on the offsetting issue. It is a complicated issue, involving not just employers’ affordability and the business environment, but also employees’ interests. Employers and employees need to engage in a rational discussion of the issue to find a consensus solution.
    
5. The MPFA agrees that the MPF System needs to be continually refined and hopes the consultation will lead to discussions on how to strengthen the System and the other existing pillars of Hong Kong’s retirement protection framework. The Management Board of the MPFA will discuss the consultation paper and the MPFA will make a submission to the Commission afterwards.
    
6. The establishment of the MPF System can be considered a landmark in the development of Hong Kong’s retirement protection framework. Currently, over 85% of the working population are covered by the MPF System or some other forms of retirement scheme. This coverage is very high by international standards.
    
7. The MPF System is the second pillar in the World Bank’s multi-pillar retirement protection framework. One of its purposes is to assist employees themselves to accumulate savings for part of their retirement protection. However, Hong Kong’s overall retirement protection framework needs to be supported by other pillars alongside the MPF System, and the different pillars need to work together to provide adequate retirement protection for the entire population.
    
8. As at the end of October 2015, retirement assets accumulated in the MPF System were almost $600 billion, of which some $120 billion was net investment returns (after the deduction of fees and expenses). The System’s annualized rate of return from December 2000 to October 2015 was 3.4%, higher than the average annual inflation rate of 1.8% over the same period.
    
9. As a matter of fact, MPF voluntary contributions have recorded strong growth in recent years, indicating that more and more employers and employees recognize the value of the MPF in helping employees save for retirement. The amount of MPF voluntary contributions had increased from $4.1 billion in 2007 (13% of the total MPF contributions in the same year) to $12.8 billion in 2014 (21% of the total contributions in the same year), representing a 200% increase.
    
10. The MPFA welcomes the views of the public and will continue to explore ways to refine the MPF System to better meet the needs of the working population and build a retirement savings system that is valued by Hong Kong people.

– Ends –

22 December 2015