Editor’s note: The following are comments made by Kent Yau, Director (Policy and Regulation) of the Mandatory Provident Fund Schemes Authority (MPFA), in response to an article published on China Daily Hong Kong Edition

In response to the article titled HK Needs To Allow Buying Property With MPF on Dec 31, 2024 by Dr Ken Ip (the Article), I would like to share supplementary information to help your readers gain a better understanding of Hong Kong’s MPF System and its features vis-à-vis pension systems outside Hong Kong.

READ MORE: HK needs to allow buying property with MPF

The MPF is established with a clear focus to help Hong Kong’s workforce build up their basic retirement nest egg, with accrued benefits accumulated through regular contributions by both employers and employees throughout an employee’s career span with the help of compounding effect. Systems that support members in accumulating savings for purposes other than retirement often involve setting up separate schemes or accounts for different savings purposes and higher levels of aggregate contributions. For example, housing-related savings in the Chinese mainland are kept under dedicated savings accounts under the separate Housing Provident Fund scheme with contributions distinct from those for pension insurance. Meanwhile, for the Macao Special Administrative Region’s Social Security System and Non-Mandatory Central Provident Fund, both administrated by the Fundo de Segurança Social of the Macao SAR government, home purchase is not permissible grounds for receiving allowance or making benefit withdrawal. Regarding the Central Provident Fund (CPF) of Singapore, as cited extensively by the writer in the Article, it is set up with a multi-account structure serving multiple purposes. Individual CPF accounts have their respective designated functions, serving as sources of funds for purposes including (i) retirement; (ii) home purchase; and (iii) healthcare-related expenses. If a CPF account owner chooses to purchase residential property, he/she can only make use of the accrued benefits from his/her specific account established under the CPF that permits withdrawals for housing-related purpose (i.e., (ii) above). Restrictions on the use of the accrued benefits as well as arrangements to refund the CPF after sale of the property concerned have been set out in detail by the relevant authorities. In short, the CPF system also explicitly forbids the use of accrued benefits in the Retirement Account for any purpose other than retirement protection. Furthermore, as rightly pointed out in the Article, in order to fund the housing-related savings and other policy objectives assigned for the CPF, the total contribution rate as a percentage of wages for the CPF can be as high as 37 percent for individuals aged 55 and below in Singapore (versus a modest total contribution rate for the MPF System, at 10 percent of relevant income throughout the entire contribution period, i.e., ages from 18 to 64). Enabling members of the CPF to use their accrued benefits for home purchase is in fact a conscious policy as designed, and this further entails additional mandatory contributions from employers and employees which are above-and-beyond the level required for basic retirement protection. The writer emphasized the “flexibility” of the home purchase option in the CPF. However, the discussion did not address the additional contribution responsibility it entails. This omission limits readers’ ability to holistically consider the issue from a balanced perspective. The Article rightly acknowledged the validity of stakeholders’ concern that allowing MPF funds for home purchase would undermine the MPF System’s core purpose of securing basic retirement protection for the working population. It also proposed various policy designs to better safeguard against other undesirable implications if a system were to be set up for members to save for home purchase. Hence, there should be thorough discussion in the community, strong consensus among stakeholders and careful deliberation of details before considering whether to leverage the MPF System’s infrastructure for accumulating savings for non-retirement purposes and potentially increase MPF contributions to complement such enhancements. MPFA continues to welcome views and proposals to further enhance the MPF System for the benefit of our working population and strengthening the multipillar retirement protection framework in Hong Kong.

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Kent Yau

Director (Policy and Regulation)

Mandatory Provident Fund Schemes Authority

The views do not necessarily reflect those of China Daily.