Policy Considerations in Setting up the CSPF Scheme

One of the key elements of the Civil Service Reform is to facilitate the inflow of outside talent into Government at various levels.  Retirement benefits in the private sector are mainly in the form of provident funds.  It is therefore important to introduce a similar retirement benefits system in Government so that outside talent can carry their retirement benefits when switching jobs between the private sector and the civil service.  In this way, they will not be inhibited from joining Government at various times of their career.  The implementation of the Mandatory Provident Fund Schemes Ordinance has also provided a ready infrastructure to support the use of a provident fund scheme in the civil service.

In addition, the introduction of the CSPF Scheme will have advantages in financial management terms.  First, this will entail a funded approach in respect of the provision of retirement benefits.  Secondly, this will enable payment of the retirement benefits for the current civil servants throughout the active service of the staff rather than deferring the liabilities for retirement benefits of present day civil servants to the next generations.  Thirdly, the commitment under a provident fund system is transparent and predictable whereas the liabilities under the pension schemes are open-ended in that they are subject to many uncertain factors such as inflation in the economy, changes in life expectancy, etc.