MPF-annuity is only an option: Law Chi-kwong

Finance | Victor Zhong 15 Oct 2021

The government is studying ways to encourage citizens to convert the MPF into an annuity, for example allowing members to take out part of the accumulated amount while the rest is invested in the annuity, said Secretary for Labour and Welfare Law Chi-kwong.

The example is taking reference from Hong Kong's Civil Service pension schemes, said Law. Under the Old Pension Scheme, civil servants can enjoy a pension gratuity of up to 25 percent of pensions payable as a lump sum upon retirement, while the New Pension Scheme allows a gratuity of as much as half of payable pensions.

Not all of the MPF will be transferred into the annuity, Law said yesterday, and added that there are also other alternatives that could be discussed, offering choices for Hongkongers.

"One of the most important things in Hong Kong is to have choices," he said.

This came after Chief Executive Carrie Lam Cheng Yeut-ngor previously clarified that the citizens will not be requested to convert the MPF into an annuity. Law also said that forcing people to make the conversion is an "Arabian Nights" case that would never happen in the city.

The administration's target is to provide directional documents by the end of this government's term for the next government to follow up, Law said.

Meanwhile, the SAR government is proposing a new financial support scheme for small-to-medium enterprises to brace for the abolition of the "offsetting" arrangement under the MPF scheme.

The new plan will set an annual HK$500,000 expense ceiling in severance payment and long service payment for employers, he said.

He added that the government believed most companies would not record expenses exceeding that amount. The employers only need to pay HK$3,000 each to those fired staff for the first three years under the new plan, said Law.

He also dismissed concerns that companies may fire staff to curb cost, saying that the expense cap for severance payment and long service payment will be recalculated, resulting in a higher layoff cost.

Given high hiring and training costs, he expected people who understand things will not fire employees, except for a few exceptions.

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