By Bloomberg News
(Bloomberg) — As tens of thousands flee Hong Kong for a new life in the UK, they’re confronting the risk that they will be forced to leave behind their retirement savings as China intensifies its crackdown on the city’s freedoms.
Scores are being denied access to money in the Mandatory Provident Fund because of the cascading impact of Beijing’s decision in January to withdraw recognition of British National Overseas passports as valid official documents.
The UK government anticipates more than 300,000 residents will use the passport to leave Hong Kong, putting billions of dollars at risk of being trapped. About 30,000 visa applications under the so-called BN(O) passports were made in the first quarter of 2021 alone.
The city’s retirement fund has told account providers that these passports can’t be used to prove departure from Hong Kong, a pre-requisite for early access to funds. Trustees, which include major institutions like HSBC Holdings Plc, Manulife Financial Corp., AIA and Sun Life Financial Inc., now aren’t allowed to release the money to those who’ve relocated on the passports.
A 37-year-old real estate professional who participated in Hong Kong’s unprecedented street protests in 2019 said his request to access his funds in the city’s Mandatory Provident Fund (MPF) had been repeatedly rejected even after he resubmitted his application with his British residency permit.
Struggling to find work in London in the middle of the Covid-19 lockdown, the lack of access to the money has deprived him of a crucial cushion — he says his MPF money with Manulife would be equivalent to more than a year and half’s rent.
Manulife said it follows industry practices and regulatory requirements when processing applications.
One couple who moved to the UK in April have about HK$400,000 (US$51,350) stuck in two retirement accounts in Hong Kong. Initially, HSBC staff accepted their documents and told them to expect approval in three weeks. Then the company asked for more documents, including a housing lease in the UK., along with electricity and water bills. Despite providing this, HSBC didn’t approve their withdrawal, they said.
“As with all MPF service providers, we follow the regulator’s requirements for processing applications related to early withdrawal of accrued benefits by MPF scheme members,” HSBC said in a statement.
An accountant in her 30s, now in London, said she has more than HK$500,000 worth of funds that are stuck, mostly held by Principal Trust Co. (Asia) and AIA. In May, she applied to withdraw her savings from Principal, but the firm rejected her request, while AIA is yet to respond to a similar request.
Spokespeople for Principal and AIA both said they process requests in accordance with the MPF regulations. Sun Life directed questions to the MPF’s March guidance, which said that members “cannot rely on BN(O) passport or its associated visa as evidence in support of an application for early withdrawal of MPF.”
Bloomberg couldn't independently verify the details provided by those trying to withdraw their money.
Prior to the change in rules, Bank of America had estimated that retirement fund outflows due to migration to the UK would amount to HK$53.8 billion over the next five years. Before Hong Kong stopped recognising the passports, MPF withdrawals on the grounds of permanent departure had jumped more than 40% to a record HK$3.87 billion for the six months ended March from the same period a year ago, according to figures from the fund.
Not everyone who leaves the city for the UK wants to take out their retirement funds, and many such plans around the world have limitations on when and how money can be taken out. But what’s frustrating Hong Kongers who have moved to the UK is the sudden change in rules and a lack of clarity about how they can access their money if they choose to.
Financial institutions say they have no choice but to block access to the MPF money, and that they are obliged to follow local laws — an example of the thorny environment companies operating in the city are being forced to navigate. In July, the U.S. sanctioned Chinese officials in Hong Kong and issued an advisory warning companies and investors of the risks of doing business there, citing Beijing’s efforts to exert more control over the financial hub.
In response to China’s introduction of controversial national security legislation in Hong Kong, the British government offered holders of BN(O) passports — which are available to those born before Hong Kong was handed back to China in 1997 — the right to move to the UK as well as a pathway to full citizenship.
Relations between the British and Chinese governments have deteriorated sharply since.
“MPF trustees have the duty to observe Hong Kong laws when handling the administrative matters of MPF schemes including processing applications for early withdrawal of MPF,” the Mandatory Provident Fund Schemes Authority said in a statement.
In the year that ended in June, Hong Kong saw 89,200 residents leave, though that includes people who left to places other than the UK as well. The outflow maintains the 1.2% rate of population decline set at the end of last year, the biggest drop in at least six decades for the city.
Those unable to get their money have few places to turn. It would be “very difficult” for claimants to sue the trustee as it’s complying with its statutory obligations, according to Duncan Abate, partner at law firm Mayer Brown.
If claimants can show that they have the right to reside in the UK, independent of the BN(O) — such as receiving full British citizenship after six years — then they may be able to claim their MPF funds, Abate said.
That’s what the Hong Kongers that Bloomberg spoke to in the UK are holding out for, but they also wonder if China will change the rules again and whether they’ll ever be able to get hold of their assets.
The Chinese government didn’t comment on the specifics of the story but said in an email the UK had “blatantly violated its pledges by changing BN(O) policy. It's an attempt to interfere in Hong Kong's affairs and China's internal affairs.”
Both the Hong Kong government and MPF wouldn’t comment on whether BN(O) holders who receive British citizenship would be able to access their money under the early release scheme. The Hong Kong government declined to comment on any aspect of this story.
The Chinese authorities consider the BN(O) policy as a “means to destabilise Hong Kong,” said Joseph Cheng, a retired political science professor who left Hong Kong shortly after the security law was imposed. “These people are seen as traitors and fugitives.”
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