MPF withdrawals set to soar as HK exodus continues

Hong Kong’s pension fund, the Mandatory Provident Fund (MPF), is dealing with an increased administrative burden as a result of a mini exodus from the city.

According to new Hong Kong government statistics, the SAR’s population had declined by 1.2% in the past year. The scale of the exodus is the greatest since records were first calculated 60 years ago – greater even than during the Handover in 1997.

Despite the healthy growth in MPF assets in the last year, with the average MPF member account balance now estimated at HK$272,787, the data also shows that amounts being withdrawn early by people seeking exile in the UK and elsewhere, have grown by almost 50%.

MPF scheme members are allowed to withdraw their MPF in a lump sum or by instalments when they reach the age of 65. Based on the MPF Schemes Ordinance, early withdrawal is allowed only under specific circumstances, including early retirement, permanent departure from Hong Kong, total incapacity, terminal illness, or death.

GETTING POLITICAL  

Scheme members who wish to apply for early MPF withdrawal are required to submit a claim form, relevant documents, and a statutory declaration to the respective MPF trustee stating that they will depart from Hong Kong to reside elsewhere, and have no intention of returning to work or live in Hong Kong.

One of the most striking aspects of these unusually unsettled times for Hongkongers is the sheer number of people who are choosing to leave their home, for what they hope will be a better life overseas.

The UK's Home Office has estimated that 150,000 people with British National (Overseas) (BNO) status and their dependents will arrive in the UK this year, and more than 300,000 will arrive in the next five years. Most of these people are taking their Mandatory Provident Fund (MPF) savings with them.

China’s anger at the British government for its perceived interference in Hong Kong since the introduction of the National Security Law (NSL), was underlined when the Hong Kong government announced in January that a BNO passport would no longer be recognised as a valid travel document, or as a proof of identity in Hong Kong.

Following the announcement, the Mandatory Provident Fund Schemes Authority (MPFA) issued a public statement in March stating that MPF scheme members cannot rely on a BNO passport or its associated visa as evidence in support of an application for early withdrawal of MPF.

“To this end, MPF trustees have the duty to observe Hong Kong laws when handling the administrative matters of MPF schemes, including processing applications for early withdrawal of MPF,” it stated.

A MATTER OF PERSPECTIVE

When contacted for comment, MPFA pointed AsianInvestor to data provided by MPF trustees showing that the number of permanent departure claims in the three most recent financial years all reflected a year-on-year drop in withdrawals.

However, the more recent data shows a definite surge in MPF withdrawals due to the permanent departures. According to MPF’s figures, in the first quarter of this year, Hong Kong residents planning to leave permanently applied to withdraw HK$1.93 billion from their MPF accounts – an almost 50% spike on the previous year.

The MPF withdrawal figures for the second quarter of 2021 have not yet been released, but it is likely that the high levels of withdrawal will continue – and may even escalate. UK Home Office figures show there were 10 times as many residence applications from BNO passport holders in April and May this year, compared to the first quarter.

TRENDING UP

Francis Chung, chairman of research group MPF Ratings, said the system was still robust. Latest figures show total MPF assets at HK$1.2 trillion as of end March, distributed among 4.5 million members.

“MPF average account balances are expected to increase by 24% since a year ago, which is good news for Hong Kong’s 4.5 million workers," said Chung.

Chung also told AsianInvestor it will be interesting to see the numbers in the MPFA’s next data filing. “More broadly, it is a good data point to assess movements post-protests and NSL,” he said.

“What is not good news is the fact that bonds have recorded their biggest first half year calendar loss in eight years, and that members fully invested in Hong Kong and Chinese equities have seen their results dwarfed by the strong returns from the US and European equity markets.”