In this October 5, 2020 file photo, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu signs on behalf of the Hong Kong Special Administrative Region government a comprehensive avoidance of double taxation agreement with Georgia. (PHOTO / HKSAR GOVT)

HONG KONG - The Hong Kong government has turned down the suggestion to allow premature withdrawals from the city’s compulsory retirement savings system to help the public during the current economic downturn, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said Wednesday.

Replying to a lawmaker’s question at the Legislative Council, Hui said allowing Mandatory Provident Fund (MPF) members to withdraw their accrued benefits would “undermine the integrity of the MPF system.”

Replying to a lawmaker’s question at the Legislative Council, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said allowing Mandatory Provident Fund (MPF) members to withdraw their accrued benefits would “undermine the integrity of the MPF system”

“If we relax the preservation requirement on accrued benefits and allow scheme members to make early withdrawal to meet short-term financial needs or contingency, there would be leakage of the accrued benefits from the system from time to time and damage the accumulation for value growth,” Hui said.

He said the very design of the MPF system is to allow the steady accumulation of MPF benefits “for investment and value growth during the working life of scheme members.” 

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“Accrued benefits should therefore be preserved in the system as far as possible and should only be withdrawn upon retirement of the employees,” Hui said. 

He said the government thoroughly considered the suggestion to allow withdrawals but decided not to pursue it. 

Hui also turned down the suggestion of LegCo member Paul Tse Wai-chun to allow members of the public to use their accrued MPF benefits as loan guarantees.  

“Allowing the public to use the accrued benefits of their MPF accounts as loan guarantee is in essence drawing on the accrued benefits,” Hui said.

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As of November 30, 2020, there were about 4,459,000 persons participating in the MPF schemes, with an average accrued benefits of scheme members amounting to $246,000, Hui said. 

In terms of overall investment return, since the establishment of the MPF system in December 2000 until November 2020, the annualized return of MPF after netting fees and expenses was 4.5 per cent, which was higher than the inflation rate of 1.8 per cent over the same period, he added.

Regarding Tse’s suggestion for government to consider exempting all taxpayers from paying salaries tax for one year, Hui said the 2020-21 Budget provided a one-off reduction of salaries tax and tax under personal assessment “by 100 per cent for the year of assessment (YA) 2019/20, subject to a ceiling of HK$20,000 per case.”  

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He said the measure benefits about 1.95 million taxpayers, 1.32 million of whom do not have to pay tax for the YA concerned. The revenue forgone amounts to about HK$18.8 billion.

“The government understands the varying degree of impact on people's daily lives and business operation brought by the continual COVID-19 epidemic and the associated anti-epidemic measures, and the immense pressure that the general public and the entrepreneurs are facing,” Hui said.

He said the government was monitoring the views expressed by the public on both online and offline platforms so that it could provide targeted assistance to people and industries that have been hard-hit by the pandemic. 

Hui noted that the government had introduced multi-faceted relief measures amounting to more than HK$300 billion to help the community during these difficult times. 

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“The government would continue to work together with the people in the fight against the epidemic, to ease the pressure of economic downturn facing the people and different sectors of the community, to fortify the economy, and to get prepared for reviving our economic development after the epidemic,” he added.