By Poyi (Natalie) Leung
The government yesterday got the first green light from the Legislative Assembly to extend the civil servants provident fund’s settlement period in order to minimise leaving staff’s investment risks amid the global economic downturn.
Secretary for Economy and Finance, Francis Tam Pak Yuen, led his cabinet to the plenary meeting at the Assembly, where the bill for the revision of the provident fund system was accepted to enter into deliberation process of a standing committee.
According to Tam, retirement protection schemes worldwide had registered “different levels of shrinkage” as prompted by the financial turmoil and the significant fluctuation of global financial assets values.
The civil servants provident fund scheme, which was implemented in 2007, offered three investment programs with different degrees of risk, which are the global equity fund, the global bond fund and the bank deposits combination.
Tam said, however, in the current international financial environment, values of those investment programs were affected and the global equity fund received the most significant impacts.
Administrative committee’s president of the Pension Fund, Lau Un Teng, told the Assembly in 2008 the values of the global equity fund and the global bond fund had dropped by some 57.8 percent and 14.6 percent respectively.
In contrast, the value of the bank deposits combination, which was the most “conservative investment plan among the three”, logged an increase of 2.64 percent to date, Ms Lau said.
According to the 8/2006 law decree, public servants are required to settle their provident fund accounts within 90 days after leaving the government positions.
However, as some contributors might not be certain of when they would leave the jobs, the Secretary said their investment period expected in the beginning might not be consistent with in the reality which would eventually “increase their investment risk”.
Hence, Tam said the SAR government proposed to extend the provident fund accounts settlement period from 90 days to five years in a bid to “reduce the investment risk possibly borne by leaving staff”.
The Secretary also said that the five-year deadline was decided as a cycle in the capital market was normally from three to five years.
In addition, the government proposed to revise the settlement arrangement in which contributors could conduct maximum three times of separate settlements within the five years depending on their personal financial conditions, Tam said.
Lawmaker Jose Pereira Coutinho, however, questioned the administration on why public servants, upon their departure from the government, could not be given the choice of settling their provident fund accounts at any time without any deadline imposed.
Coutinho also criticised the provident fund scheme yesterday, as “it made civil servants who usually did not have investment experience lose a major part of their life savings”.
The Secretary insisted that a five year settlement period was “appropriate”, adding that the SAR government, as a “responsible employer”, hoped to provide “an alternative and a better investment management service for its staff after quitting the positions”.
Ms Lau also said that the government was supposed “not to have the responsibility to manage staff’s provident fund after their departure”, but “the move to prolong the settlement period had taken into consideration the current economic environment”.
Meanwhile, the Assembly yesterday also saw the passing of the bill which was to allow protests or public assemblies’ organisers to appeal activity restrictions to the Court of Final Appeal without necessarily entrusting a lawyer.