Mandatory provident fund

Mandatory provident fund

The Mandatory Provident Fund (MPF) was introduced by the Hong Kong Government in December 2000. It's a compulsory savings scheme put in situ to help Hong Kong residents upon their retirement. Hong Kong features a rapidly ageing population, with people aged 65 and over forming 15% of the population in 2014. This is often estimated to extend to 28% by 2034, and to 33% by 2064. Before the implementation of the MPF Scheme, approximately 33% of the population had retirement protection. Currently, around 85% of the working population is under retirement protection.

All employees and self-employed persons between the ages of 18 and 65 (unless exempt) are required to hitch an MPF scheme. Exemptions include people already covered by statutory pensions, members of Occupational Retirement Schemes (ORSO), people from overseas working in Hong Kong for fewer than 13 months, domestic helpers and self-employed hawkers. the bulk of Hong Kong’s workforce isn't exempt and are therefore required to enrol within the MPF.

In accordance with the Mandatory Provident Fund Schemes Ordinance (MPFSO), employers are statutorily required to enrol their employees in MPF schemes and make regular contributions. Non-compliant employers could also be subject to a maximum penalty of a fine of HK$450,000 and 4 years’ imprisonment.

Under MPF legislation, employers must select an MPF service provider and enrol their employees in an MPF scheme. Both employers and employees make regular contributions to the employee’s account. The advantages are then payable at retirement or under certain circumstances like early retirement, permanently leaving Hong Kong, death or terminal illness.

Contributions are determined by the amount of relevant income earned by an individual. Relevant income is any amount (in monetary terms) paid or payable to an employee by their employer. This includes wages, salaries, housing allowances, commissions, bonuses, etc. there's a minimum and maximum amount of relevant income and anything earned under or over these limits will affect contributions.

• Minimum Amount of Relevant Income = HK$7,100
• Maximum Amount of Relevant Income = HK$30,000

To calculate what proportion should be paid by the worker and employer monthly , the subsequent table shows the rates:

• Relevant Income per month: but HK$7,100 – Employer’s Contribution: 5% – Employee’s Contribution: 0%
• Relevant Income per month: HK$7,100 – 30,000 – Employer’s Contribution: 5% – Employee’s Contribution: 5%
• Relevant Income per month: quite HK$30,000 – Employer’s Contribution: 5% of the primary HK$30,000 – Employee’s Contribution: 5% of the primary HK$30,000

When a corporation joins an MPF scheme, the trustee (scheme manager) will present the funds available for the contributions to be placed. Each employee is liberal to choose which funds to take a position in. This decision is predicated on individual investment objectives and risk profiles – low-risk funds will achieve a little but steady growth, whereas, a better risk fund will achieve higher returns but are going to be more volatile. the cash is then placed into the chosen funds and left to grow until the advantages are withdrawn. The trustee will issue an ‘Annual Benefit Statement’ which can inform you of:

• The income and expenditure of your account
• The account balance and accruals
• The extent to which the contributions are vested
• The gains and losses related to your account over the relevant financial period

Employees are liberal to change their investment portfolio at any time but there could also be a limit to the number of times you'll do that which can be set by the Trustee of the scheme. Contributions from a person’s previous jobs are often moved into either the scheme at their new job or into a private MPF account. Consolidating previous funds and remaining up-to-date will ensure easy management.