LCQ7: Withdrawal of MPF

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Following is a question by the Hon Chan Kam-lam and a written reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (May 18):

Question:

It has been reported that the birth rate of the Hong Kong population reached its peak shortly after the Second World War, and a large number of people will attain the statutory retirement age of 65 in the coming few years, causing a surge in the withdrawal of Mandatory Provident Fund (MPF). At that time, there will be a substantial outflow of capital from the stock and bond markets, which may deal a blow to the stability of Hong Kong's financial market. In this connection, will the Government inform this Council:

(a) of the number of cases in which MPF contributors withdrew their full accrued benefits on the ground of having attained the statutory retirement age of 65 and the amount involved in each of the past four years, as well as the respective percentages of the number of such contributors and the amount of their contributions in the total number of MPF scheme participants who attained the age of 65 in that year and in the total amount of their contributions;

(b) of the number of cases of early withdrawal of MPF accrued benefits and the amount involved in each of the past four years, with a breakdown of the numbers of cases concerned and the amounts involved, by the five statutory reasons for early withdrawal of MPF accrued benefits;

(c) of the estimated numbers of MPF contributors who will attain the statutory retirement age in the coming five years and the MPF accrued benefits involved, as well as whether the authorities have estimated the respective numbers of cases of early withdrawal of MPF accrued benefits and the amounts of such benefits involved each year; if they have, of the results; and

(d) of the authorities' estimated time when the withdrawal of MPF will reach its peak in Hong Kong, and the details of the contingency measures to be adopted?

Reply:

Madam President,

According to the information provided by the Mandatory Provident Fund Schemes Authority (MPFA)

(a) Between 2001 and 2004, the total amount of accrued benefits withdrawn by Mandatory Provident Fund (MPF) scheme members on the grounds of attaining the statutory retirement age of 65 or the statutory early retirement age of 60 under section 15(1) and (2) of the Mandatory Provident Fund Schemes Ordinance (MPF Schemes Ordinance) (Cap. 485) was around HK$950 million, accounting for about 0.8% of the amount of total MPF assets accumulated in the same period (which amount to over HK$120 billion).

According to the existing legislation, scheme members may claim for early withdraw of accrued benefits for the five reasons set out in section 15 of the MPF Schemes Ordinance and Division 1 of Part XIII of the Mandatory Provident Fund Schemes (General) Regulation (MPF Schemes (General) Regulation) (Cap. 485 sub. leg. A), or either choose to withdraw or not to withdraw the accrued benefits immediately upon attaining the statutory retirement age of 65. Thus, MPFA cannot deduce the number of withdrawal cases of accrued benefits solely from the total number of scheme members attaining the age of 60 to 65 in these few years. Since the data collected by MPFA are mainly related to MPF assets, MPFA cannot furnish further data on the number of cases of withdrawal of accrued benefits on the grounds of retirement, nor data on the percentage of such scheme members in the total number of scheme members in the retirement age group in the respective year.

(b) Between 2001 and 2004, the total amount involved in early withdrawal of accrued benefits by MPF scheme members for the five reasons set out in section 15 of the MPF Schemes Ordinance and Division 1 of Part XIII of the MPF Schemes (General) Regulation are as follows:


Reason                                    Total amount (HKD)
------                                    ------------------

Retirement/Early retirement Note 1          950 million
Permanent departure from Hong Kong        790 million
Death                                     110 million
Total incapacity                           50 million
Small balance account                      10 million

Note 1: Early retirement is one of the reasons for early withdrawal of accrued benefits, but MPFA does not have separate breakdown on the amount of benefits withdrawn on the grounds of retirement or early retirement.

There was a total of about 22 000 cases of early withdrawal of accrued benefits on the ground of "permanent departure from Hong Kong". MPFA does not have information about the number of cases of early withdrawal on other grounds.

(c) From the information provided by the trustees of the MPF schemes, MPFA deduces that the number of scheme members currently aged 60 to 65 is about 60,000.

MPFA estimates that in five years, i.e. in 2010, there will be about 10,000 scheme members attaining the statutory retirement age of 65 or above in that year, accounting for about 0.4% of the total number of MPF scheme members, while there will be about 100,000 scheme members attaining the statutory early retirement age of 60 or above, representing about 4.5% of the total number of MPF scheme members.

MPFA cannot estimate the number of cases of withdrawal or early withdrawal of accrued benefits in 2010, because MPF scheme members may choose to withdraw or not to withdraw the accrued benefits immediately upon attaining the statutory retirement age of 65, and MPFA cannot predict the scheme members' choice. Nor can MPFA estimate the number of cases of early withdrawal of accrued benefits for the five reasons, viz. "early retirement", "permanent departure from Hong Kong", "death", "total incapacity" and "small balance account".

As to the total amount involved in withdrawal or early withdrawal of accrued benefits, MPFA cannot make the relevant estimation because such amount is subject to various unknown factors, including the amount of contributions made by the scheme members concerned, the amount of accrued benefits accumulated and the investment return in the next few years.

(d) It can be seen from the above figures that those who were born shortly after the Second World War when the birth rate reached its peak and who will retire in the coming five years or so only account for between 0.4% to 4.5% of the total number of MPF scheme members. As MPF scheme members may choose not to withdraw the accrued benefits immediately upon attaining the retirement age, we estimate that the number of cases of withdrawal or early withdrawal of accrued benefits on the ground of retirement should be smaller than the total number of scheme members attaining the age of 60 to 65. The MPF System was implemented only in late 2000. As such, by 2010, scheme members will at most have accrued benefits derived from their contributions for about ten years.

Moreover, in the previous four years ending 2004, the total amount of accrued benefits withdrawn or early withdrawn on the ground of retirement was only around HK$950 million, while the amount of total MPF assets exceeded HK$120 billion in the same period. We therefore believe it is not likely that the withdrawal of MPF will reach its peak in the next few years. Nevertheless, MPFA will continue to monitor the relevant situation of withdrawal of accrued benefits.

It is worth noting that scheme members attaining the statutory retirement age of 65 may choose not to withdraw the accrued benefits immediately. And even if they choose to withdraw the accrued benefits, it is likely that the relevant funds will be placed or reinvested in Hong Kong's financial market.

Ends/Wednesday, May 18, 2005

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