Mandatory Provident Fund providers agree it is time to review the local pension scheme - launched nearly a decade ago - but they differ on a proposal to withdraw proceeds early for non- retirement use. The providers want the government to allow a wider investment scope so employees have more fund choices.
"We are not demanding the introduction of advanced investment products like hedge funds or private equity funds, but it would help employees' portfolio if they can invest more on emerging markets like India and China," said Invesco chief operating officer Desmond Ng Ka-yiu. According to current regulations, a constituent MPF fund can invest not more than 10 percent in equities listed on a stock exchange which is not categorized as an "approved stock exchange." This includes bourses in the mainland and India.
Authorities should consider reforming the fund withdrawal system, said BCT managing director Lau Ka-shi, who urged fund withdrawals in the form of an annuity rather than a one-off redemption. "People will not become investment experts suddenly when they turn 65," said Lau. She said it is risky for members to hold a large sum of money without investment guidance.
US citizens can dip into their pension fund for the downpayment of a first home, while Singaporeans can tap their scheme for their children's education. Mandatory Provident Fund Authority chairwoman Anna Wu Hung-yuk said in May that whether Hong Kong people will be allowed to do the same will be considered when the MPF scheme is reviewed next year.
HSBC Insurance Hong Kong managing director Jason Sadler warned about allowing early withdrawal. "It should be studied very carefully as that may conflict with the MPF objective," he said
Convoy Financial Services chief commercial officer Ernest Chan Tsz- kin said employees should be given flexibility on using their MPF funds if they need them urgently before retirement.
The Article: Use of MPF nest-egg sparks sharp debate among providers
Mandy Lo, The Standard Hong Kong
3rd August 2009