Hong Kong’s Mandatory Provident Fund (MPF) regulator isn’t going to loosen restrictions on early withdrawals from the city’s default retirement savings scheme.
It’s a move that’s been undertaken by pension funds in some Asian countries as a way to help ease the financial burden for citizens amid the ongoing COVID-19 pandemic – the impact of which has been felt in Hong Kong since late January.
However the Mandatory Provident Fund Schemes Authority (MPFA) won’t extend this to members confronting tough economic times because of the pandemic, saying that this isn’t the aim of the scheme.
“The objective of the MPF system is to accumulate retirement savings through long term and regular mandatory investments with the benefit of compounding effect,” a spokesperson from the MPFA told Asia Asset Management magazine.
The source added that permitting early withdrawals on the grounds of financial difficulties “does not align with the original objective” of the MPF system – which is to provide basic retirement protection for Hong Kong residents.
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A number of pension funds in APAC – including Australia, Malaysia, the Philippines and Thailand – have moved to reduce the financial burden on members by allowing early withdrawals, as well deferring or reducing contributions.
However this has come under fire in some countries. For example in Australia, there are concerns that allowing Millennials and Gen Zers to access their superannuation (the equivalent to MPF) now will severely compromise their pension scheme returns later in life.
The MPFA spokesperson added that the Hong Kong government introduced a package of measures in late February to address financial difficulties caused by the pandemic, such as the individual HK$10,000 paid to permanent residents.
Early withdrawals exceptions are sometimes made special circumstances, such as terminal illness or if members leave Hong Kong permanently.
In normal circumstances, MPF members can only withdraw their contributions when they reach the official retirement age in Hong Kong, set at 65.