The Business and Professionals Federation of Hong Kong, a more-than-averagely sleep-inducing think tank, urges the government to let people use part of their Mandatory Provident Fund retirement savings for home purchase during their working life. The group adds that Singapore allows it, which may or may not impress us deeply.
As things currently stand, the proposal has a flaw: thanks to former Chief Executive Donald Tsang we have a deliberately engineered artificial shortage of housing for sale. Any financial inducement or assistance to purchase residential property will simply be used to further bid up the prices of the inadequate supply of available apartments. The same also applies to tax allowances for mortgage interest payments and suggested government subsidies for young first-time buyers: the extra cash just goes into the sellers’ pockets, which in effect means the property developers.
Former Chief Secretary, elder statesman and BPFHK boss Sir David Akers-Jones is no friend of our local real estate tycoons (unlike one of his successors, Rafael Hui). So we can rest assured this is not some lame scam but a well-intentioned proposal. (The property moguls have their own think tank, the rather out-of-favour Bauhinia Foundation, which essentially backed nice-but-dim rich-kid Henry Tang for Chief Executive. Akers-Jones of course supported CY Leung.)
Given improved supply of housing – or simply a collapse in prices given that we have 200,000 or whatever units empty – the BPFHK’s idea looks fair enough. And why stop at housing? Maybe people could withdraw MPF money for health costs (also allowed in Singapore) or to help their kids out with college tuition, or repay their own student loans.
Or – and here’s a radical idea – maybe we could allow people to withdraw MPF funds and put the money into savings for their retirement. To which many people will reply: isn’t that the whole purpose of the compulsory MPF system in the first place? And we all know the answer to that.
As people in Hong Kong are becoming increasingly aware, the MPF has proved a rip-off. A letter in the South China Morning Post recently complained that the writer’s total MPF savings (presumably allocated in ‘safe’ fixed-income funds) were actually less after some 10 years than the total payments into the system. The writer would have more for her retirement had she stuffed the cash under her mattress.
When the system started, the financial companies running MPF services justified their fees by (among other things) pointing out that start-up costs were high. Mr Webb in 2007 calculated that fees at that time meant that over several decades you might get back only half the contributions-plus-returns you should have a right to expect. That’s right: 50 cents in the dollar. More recently, some service providers have been moving towards lower-cost structures. But the basic principle still applies: the MPF isn’t helping people save for retirement – it’s making it harder.
For the better-off, the MPF account is a bit of left-overs in a far-off corner of the portfolio. But for people on average incomes, a big chunk of their savings is being pocketed by someone else. Where are the hundreds of thousands of workers marching on the street in angry protest?
Maybe the BPFHK’s suggestion will wake people up a bit. ‘Aging ex-civil servant accidentally starts mass rioting; hundreds of fund managers reported hanging from lamp-posts’.
Which brings us very neatly to a fine opportunity to plug the signed, limited-edition-but-still-available print Sir David Akers-Jones Psychedelic Freak Out, now seen on one or two more-eccentric businesses’ office walls. And yes, of course, you are allowed to withdraw funds from your MPF account to buy them.