Some Hong Kong lawmakers expressed support for allowing “full portability” in the city’s Mandatory Provident Fund (MPF), which would allow members to move their entire pension balance to a different provider once a year.
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A Legislative Council panel meeting discussed a legal change on Monday that would implement full portability next year. Currently, members can move their own contributions, but not those made by their employer, once a year. Chief Executive John Lee Ka-chiu unveiled the proposed change in his policy address in October.
The change would “give more choice to employees, while also adding to competition in the industry”, said lawmaker Robert Lee Wai-wang, who is also the chairman of Hong Kong-based Grand Finance Group.
“The full-portability reform aims to encourage employees to proactively manage their MPF investments and promote market competition, thereby creating room for fee reductions,” said Sharon Ko Yee-wai, deputy secretary for Financial Services and the Treasury, during the financial affairs panel discussion.
Established in 2000, the MPF is a compulsory retirement scheme that requires employers and employees to each pay 5 per cent of the salary, up to a combined HK$3,000 (US$385) a month, into an investment account managed by one of 12 MPF fund providers. At the end of March, the scheme covered 4.75 million members and had total assets of HK$1.338 trillion.
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Only employers could choose the MPF provider until 2012, when the Employee Choice Arrangement was introduced. Commonly known as “semi-portability”, this allows employees to transfer their own contributions – but not those made by their employers – to a new provider once a year.
Employees conducted about 1 million transactions involving HK$50 billion under the semi-portability regime from its launch up to April of this year, Ko said.