The Mandatory Provident Fund Schemes Authority (MPFA) is studying proposals which will allow scheme members to withdraw part of their accrued benefits before reaching retirement age at 65, Secretary for Financial Services and the Treasury K.C. Chan said on Wednesday.

An internal task force within the MPFA has been set up to study the proposals, he said.

The MPFA will submit the findings to the government before the end of the year.

He said the government will be open-minded in considering the recommendations. The government will also consult the relevant panel of the Legislative Council (LegCo) and the public before arriving at a final decision.

Chan made his point in a reply to an oral question from unionist lawmaker Lee Cheuk-yan during Wednesday's LegCo meeting.

Lee said many employees fear that their purchasing power may shrink markedly by the time they reach retirement age, and that they hope to withdraw a portion of their accrued savings early, while leaving the remainder to be collected on a yearly or fixed period basis.

Another unionist lawmaker Wong Kwok-hing also urged the government to consider the proposal, saying some people may encounter unforeseen financial needs such as medical costs and living expenses.

Chan responded that the MPFA task force will consider various means of partial withdrawals before retirement.

He cited as examples phased or fixed period withdrawals on top of the current practice of withdrawal of the full amount.

He said a combination of withdrawal mechanisms may be considered, too.

The task force will factor in operational experience of the MPFA over the past decade, the city's situation, and foreign practices.

At present, only those who can prove they intend to leave the city permanently are able to withdraw their money in full before the age of 65.

The government will consider other reasons for early, partial withdrawals.

Chan noted since the mandatory provident fund is designed as a retirement protection plan, early withdrawal of the accrued benefits will affect the life of retirees.

Again, he pointed out that the amount of mandatory provident fund contributions from both employers and employees in foreign countries is higher and may in addition serve special purposes such as investment and buying properties.

In Hong Kong, however, employer and employee contributions are quite small, and so the accrued benefits may not be large enough to cover contingencies, Chan said.

joseph@chinadailyhk.com

China Daily

(HK Edition 07/14/2011 page1)