However, the actual abolishment may have to wait until 2025
A bill scrapping the offset mechanism of Hong Kong's Mandatory Provident Fund (MPF) was passed by the Legislative Council on Thursday.
In Hong Kong, the Mandatory Provident Fund (MPF) is a programme developed to provide retirement savings for employed citizens.
Under the Mandatory Provident Fund Schemes Ordinance passed in 1995, employers could use the benefits of their mandatory contributions to offset, under specific circumstances, the expenses for severance payment (SP) and long service payment (LSP) that they shouldered.
This resulted to weakened retirement protection offered to employees, according to the government, with the contributions to the MPF depleting because of the offsetting arrangement.
But with the passing of the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022, employers are prohibited to use workers' pensions to "offset" SP and LSP.
Hong Kong Chief Executive Carrie Lam extended her gratitude to the Labour Advisory Board and relevant employers' and employees' organisations for "upholding mutual understanding" and offering valuable views on the bill over the years.
"Their efforts have facilitated the LegCo's smooth passage of the Bill, which is hailed as a major achievement of the current-term government in enhancing the retirement protection system of Hong Kong," read the government's media release.
Secretary for Labour and Welfare, Dr Law Chi-kwong, called the passing of the bill a "historic moment" for Hong Kong.
"The passage of the Bill for abolishing the 'offsetting' arrangement under the Mandatory Provident Fund System is a historic moment and an important milestone in improving retirement protection of employees," said the secretary. "Six years and a half since the public consultation on retirement protection in 2015, the legislative amendments have now been completed."
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According to the government, they will press ahead with the necessary arrangements for the abolishing of the offset mechanism.
This includes the establishment of the Designated Savings Accounts scheme on the eMPF platform to help employers meet the potential SP and LSP liabilities once the offset arrangement is gone.
Extensive publicity will also be carried out in order to inform employers about the removal of the offset arrangements.
"Following the full implementation of the eMPF Platform, which is being developed by the Mandatory Provident Fund Schemes Authority, the government expects that the 'offsetting' arrangement could be formally abolished in 2025," read the government announcement.
