Chief Executive CY Leung has proposed enhancing the Mandatory Provident Fund with a proposal to progressively abolish the “offsetting” of severance or long-service payment systems with the fund contribution.
Outlining retirement protection initiatives in the 2017 Policy Address today, he said the abolition will have no retrospective effect.
"In other words, employers’ MPF contributions before the implementation date of the proposal will be 'grandfathered'," he said.
Noting some severance and long-service payment functions overlap those of the Mandatory Provident Fund, Mr Leung proposed the amount of these payments for an employment period from the implementation date be adjusted downwards from the existing entitlement of two-thirds of one month’s wages to half a month’s wages as compensation for each year of service.
"Apart from obtaining a certain sum as compensation upon dismissal, dismissed employees will have their MPF fully protected upon the implementation of the proposal,"
Mr Leung said.
"Although expenditure by employers will increase, the ‘grandfathering’ arrangement and the government subsidy will help mitigate the impact."
To address concerns on high fees and the difficulty in making investment choices, a centralised electronic platform will be put in place to facilitate the standardisation, streamlining and automation of the MPF scheme administration for further cost-reduction so employees will have full control over their investment strategy.
This will promote competition among trustees and allow fee reductions, he said, noting the Government’s vision is “one member, one account”, so each employee will pool all MPF accrued benefits into a single fund account for more effective management of their retirement savings.
"The Government will render full support to these efforts," Mr Leung added.
