Jake'S View | Offset smokescreen hides real folly of multiple MPF accounts

The regulator of Hong Kong’s MPF pension system has for the first time called for a rethink of the notorious mechanism that allows employers to use the money they put into worker’s retirement funds to cover their severance and long-service payments.

SCMP, June 9

Notorious? Let’s consider this. We start with an economic crunch in the 1970s during which people lost jobs they had long held and found themselves distressed.

This should not happen, said the government. We must help such people tide themselves over in bad times. It then legislated a mandatory severance payment of two thirds of the last monthly wage times the number of years of service.

Employers didn’t like it, of course, but let’s accept that there was a true social need and the severance payment addressed this need.

Now we come to the formation of the Mandatory Provident Fund, when it was decided that both employee and employer should pay a mandatory monthly pension contribution of five per cent of the employee’s wage.