XN000022-1995-03-08 — Page 38

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Benefit level

Let me deal now with some particular points which appear to be giving rise to concern and confusion. Some have called for a minimum benefit level to be provided under the MPF, or for a pension to be provided for those who have not saved enough under the system. While we appreciate that there will be those who may not have been able to accrue what they perceive to be an adequate amount on which to retire, the MPF, like other similar systems, would operate on the strict principle of beneficiaries receiving what the retirement protection scheme has produced in the way of investment return. Those in genuine financial need would still be able to apply for existing welfare benefits for the elderly, subject to eligibility.

Relationship with LSP and SP

I shall now turn to the question of how the MPF will relate to the provision for Long Service Payments (LSP) and Severance Payments (SP) under the Employment Ordinance. At present, the employer's contributions to a retirement scheme may be set-off against any amount he has paid out for SP or LSP. Employers do not pay twice. SP and LSP are not designed as supplementary retirement schemes - they are intended to be alternatives to these retirement schemes. That is why the off-setting provision exists under the present voluntary system of occupational retirement schemes. We do not intend to change it under the MPF, although we will need to consider very carefully the effect of the MPF on both schemes.

Preservation and portability

The basic aim of a retirement protection system must be to ensure that an employee accrues enough benefits by the end of his working life to allow him to enjoy an element of financial security in his retirement years. For this to happen, the benefits must be kept intact until the end of his working life, not paid out upon change of job. This is the principle of benefit preservation. Upon change of job, the accumulated balance would be transferred from the scheme of the former employer to that of the new employer. This process would be repeated each time the employee changed job. The retirement benefit payment would be made by the scheme of the last employer prior to retirement. The question of portability, and how to make it work as smoothly as possible, to the benefit of scheme contributors, is one that will be examined very carefully by our consultants.