LegCo Subcommittee on MPF System
Information Note
Withdrawal of Accrued Benefits

Purpose

This paper describes :

  1. the proposed circumstances for benefit withdrawal (paragraph 2-3 below);
  2. the documents required for application for benefit withdrawal and the proposed measures to avoid creating loopholes for benefit withdrawal on grounds of total disability and permanent departure (paragraphs 4 to 10 below); and
  3. the proposed measures to assist scheme members or the personal representatives of deceased scheme members to track their accounts for withdrawal purposes (paragraph 11 below).

Proposal

Circumstances Permitting Benefit Withdrawal

2. We propose to adhere to the circumstances for benefit withdrawal as specified in the principal legislation :

  1. when a scheme member has attained the retirement age of 65;
  2. when a scheme member has attained age 60 and ceased his employment (early retirement);
  3. permanent departure from Hong Kong;
  4. total disability or incapacity;
  5. death; and
  6. for offsetting purpose against severance payments (SP) or long service payments (LSP) under the Employment Ordinance.

3. We propose to provide only one additional circumstance for benefit withdrawal. That is to allow a scheme member who has left the workforce to withdraw his small dormant account of $5,000 or less. A scheme member will be allowed to withdraw the accrued benefits provided that :

  1. the small account has been dormant for one year or more;
  2. the member has not kept any active MPF account during that period of time; and
  3. the member makes a statutory declaration to the trustee that he has left the workforce for longer than one year and does not expect to return to the workforce in the foreseeable future.

Documents Required for Benefit Withdrawal

Retirement

4. We propose to require applicants for benefit withdrawal due to retirement to provide a proof of identity showing his attainment of the retirement age. In addition, applicants applying due to early retirement are required to make a statutory declaration to certify that they have permanently ceased employment or self-employment.

Total disability or incapacity

5. We propose to define "total disability or incapacity" in the same way as that in the Employment Ordinance for eligibility of long service payment. The definition is "when a scheme member is certified by a registered medical practitioner as being permanently unfit for the particular kind of work in which the employee was formerly engaged".

6. To be in line with the requirements under the Employment Ordinance, we propose that applicants for early withdrawal due to total disability or incapacity will need to produce:

  1. a statement issued by a registered medical practitioner certifying that he is permanently unfit to carry out duties of his occupation immediately prior to his disability or incapacity; and
  2. proof from the employer certifying that the member has terminated the current contract of employment.

Permanent departure from Hong Kong

7. We propose that :

  1. applicants for early withdrawal of accrued benefits on the grounds of permanent departure from Hong Kong should be required to produce the following proof -
    1. an immigration visa or a valid foreign passport or a Home Visit Permit;
    2. the final tax assessment from the Inland Revenue Department, if available;
    3. statutory declaration before Justice of Peace or Commissioner of Oath; and
  2. a scheme member who has previously withdrawn his MPF benefits upon permanent departure from Hong Kong and subsequently re-enters into the MPF net will not be allowed to withdraw benefits on the same grounds again.

Death

8. We propose that the personal representatives of the deceased scheme member shall provide the death certificate of the deceased scheme member and a grant of probate or letters of administration granted by the Probate Registry.

Offsetting of severance payments or long service payments

9. The scheme member does not need to provide any additional document other than the amount of SP/LSP payable as indicated by the employer in the application form for withdrawal.

Small dormant account

10. The scheme member shall provide the form with the statutory declaration on item (b) and (c) in paragraph 3 above.

Tracking of MPF Accounts

11. The following measures will facilitate members to track their scattered accounts :

  1. given that trustees will provide annual benefit statements to scheme members, the latter should have no difficulty in tracking their MPF accounts if they keep the statements properly. MPFA will also conduct education campaigns to encourage scheme members to consolidate their accounts as much as possible;
  2. all "unclaimed benefits" will be transferred to the Residual Provident Fund Scheme to facilitate scheme members to search for their forgotten account balances; and
  3. scheme members may seek the assistance of MPFA to search their accounts through the trustees’ records by using their HKID numbers at fee will be charged to discourage indiscriminate use of the service as well as to recover the operating costs of the MPFA in providing the service.

Justification

Circumstances Permitting Benefit Withdrawal

12. The objective of the MPF System is to assist the workforce to save for old age. We, therefore, need to adhere firmly to the principle of benefit preservation until attainment of retirement age. To meet special needs under different circumstances (e.g. medical treatment or home purchase), we should continue to rely on existing systems such as the medical care system, the social security system and various public housing and home ownership schemes rather than the MPF System. Otherwise, the nature of the MPF System would easily turn from a retirement protection system to an ordinary savings plan.

13. Therefore, other than the circumstances specified in the principal ordinance (paragraph 2 above), we only propose one additional circumstance for benefit withdrawal i.e. withdrawal of small dormant accounts by scheme members who have left the job market. The objective is to protect employees who have stayed in the job market for a short period of time (e.g. housewives) who will not be allowed to withdraw their accrued benefits in their small balance accounts unless under the specified circumstances for withdrawal. These accrued benefits may be eroded due to fees and expenses of the scheme.

14. The proposal to allow early withdrawal of small dormant balances by members who have left the workforce may appear contrary to the MPF principle of preservation. This can, however, be justified as follows :

  1. Limited retirement protection : In the absence of any further contributions to the accounts in the near future, the small balances will not contribute in a meaningful way towards an individual’s retirement.
  2. Interest of members : Since the small dormant accounts will be at risk of eroding, it is likely to be in the individual’s best financial interest to withdraw the benefits rather than suffer from a reduction as a result of preservation in the MPF System.

Documents Required for Benefit Withdrawal

15. To avoid ambiguity and to facilitate trustees to process applications in respect of benefit withdrawal, it is necessary to spell out clearly in the subsidiary legislation the documents required under different circumstances of withdrawal. We envisage that permission to have early withdrawal on grounds of total disability or incapacity and permanent departure from Hong Kong will easily be abused by scheme members if there are not appropriate definitions or measures in place to plug possible loopholes.

Total disability or incapacity

16. It is necessary to clearly define "total disability or incapacity" for the purposes of benefit withdrawal. Under the MPF Ordinance and the Employment Ordinance, employers can use the MPF benefits arising from employer contributions to offset long service payment payable to an employee on grounds of total disability or incapacity. It is, therefore, necessary to achieve consistency in the definition of "total disability or incapacity" and requirements of proof under the two sets of legislation.

Permanent departure from Hong Kong

17. It is difficult to ascertain that scheme members withdrawing their benefits on grounds of permanent departure are really departing Hong Kong permanently. There are particular enforcement problems in respect of :

  1. local people holding foreign passports; and
  2. people who claim that they are departing Hong Kong permanently for China. They only need to have Home Visit Permits which can be obtained easily.

18. However, we do not propose to require the applicants to provide a lot of documents as proof of permanent departure because :

  1. Usefulness : Many of the requirements could be circumvented easily and would not minimize abuse.
  2. Authenticity : Trustees would have great difficulties in judging circumstantial evidence to prove permanent departure (e.g. termination of tenancy or sale of property as proofs that the applicant would leave his living place permanently, or letters from prospective employers as proof that the applicant has secured an employment offer abroad). We therefore propose to rely on documents issued by government authorities as far as practicable.

Nonetheless, as making false declaration shall constitute an offence, the requirement for making statutory declaration will act as a deterrent for scheme members to abuse the system.

19. We propose to allow scheme members to withdraw their benefits on grounds of permanent departure only once so that they will not exercise this right lightly. This is to help achieve the policy intent of preservation of benefits.

Tracking of MPF Accounts

20. To enable scheme members to keep track of their accounts in various MPF schemes, trustees will be required to send annual benefit statements to scheme members, irrespective of the status of the accounts i.e. active or dormant. Through education campaigns, scheme members will be encouraged to keep such statements properly and to consolidate their fragmented accounts as far as possible.

21. However, if scheme members or the personal representatives of any deceased scheme member still have difficulties in tracking their accounts during benefit withdrawal, there are convenient ways to assist them. They will only need to approach one contact point rather than checking with all the scheme trustees :

  1. Unclaimed benefits : Trustees will be required to transfer all unclaimed benefits together with the prescribed membership records to the Residual Provident Fund Scheme. This is to facilitate scheme members or the personal representatives of deceased scheme members to claim back their accrued benefits.
  2. Assistance from MPFA : the service mainly helps scheme members who need to withdraw benefits before retirement age or personal representatives of deceased scheme members who died before retirement age as they will not receive notification from their scheme trustees regarding benefit withdrawal.

Mandatory Provident Fund Office
Financial Services Branch
16 December 1996

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