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The Mandatory Provident Fund Schemes Advisory Committee Chairman, Professor Nelson Chow Wing-sun, said today (December 28) that the Mandatory Provident Fund Schemes Authority (MPFA) has completed a review of the minimum and maximum levels of relevant income, and that it has proposed to raise the maximum level to $30,000 from $20,000 and retained the minimum level at $5,000.
The Authority has submitted its proposal to the Government and the Administration will soon report the results of the review to the Legislative Council's Panel on Financial Affairs.
Speaking to the media after officiating at an MPF investment education event at the Hong Kong Brands and Products Expo 2006, Prof Chow said that Section 10A of the Mandatory Provident Fund Schemes Ordinance (MPFSO) provided that the MPFA must, at least every four years, conduct a review of the minimum and maximum levels of relevant income to ascertain whether there were grounds to amend the levels.
The last review was conducted in 2002, when the minimum level was raised from $4,000 to $5,000, while the maximum level remained unchanged.
"The Ordinance sets out the mechanism in formulating the minimum and maximum levels of relevant income. One of the factors that the MPFA must take into account in adjusting the minimum level of relevant income, namely 50% of the monthly median employment earnings prevailing at the time of the review as compiled from the General Household Survey conducted by the Census and Statistics Department. Meanwhile, the maximum level of relevant income must take into account the monthly employment earnings at 90th percentile of the monthly employment earnings distribution of the same survey," Prof Chow said.
He said that according to the figures released by the Census and Statistics Department in 2006, the minimum and maximum levels of relevant income were $5,000 and $30,000 respectively. Therefore, the MPFA proposed the minimum level of relevant income to be retained at $5,000 while the maximum level should be raised to $30,000 from $20,000 in accordance with the legislation.
"In fact, the 90th percentile figure has stayed at the level of $30,000 since 2001/02. However, the maximum level of $20,000 was maintained because of the economic difficulties experienced at that time. In contrast, the current economic conditions and outlook are much improved compared to those prevailing in 2001/2002. We believe it is reasonable to lift the maximum level to $30,000 according to the mechanism prescribed by the legislation," Prof Chow said.
He stressed that the impact of the proposals on employers and employees would be mild. Currently there are about 326,000 employees in MPF schemes with monthly earnings in excess of $20,000, which is about 17% of all MPF scheme members as a whole. It is estimated that the average income for about 167,000 employees earning from $20,001 to $30,000 per month is $26,475, suggesting that the increase in the amount of contributions of employer and employee would each be $325. For those earning more than $30,000, the additional contribution for employer and employee would each be $500 per month.
Prof Chow said he believed that the proposed increase in maximum relevant income level would not be an economic burden to employees. Moreover, as they contribute more, they are better prepared for retirement.
He added that as more than 80% of employees covered by the MPF system would not be affected by the proposal, it should not be an extra burden on most employers. On the other hand, the increase proposed would enhance employees' sense of belonging.
Ends/Thursday, December 28, 2006
Issued at HKT 19:14
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