What is MPF? Why is MPF important? Who is covered under the MPF system? What are the mandatory contribution rates? What are the features of MPF? What are the tax benefits?

What is MPF? MPF stands for "Mandatory Provident Fund". This is a mandatory provident fund system which has been implemented in Hong Kong since year 2000. The objective of this mandatory system is to provide secured retirement benefits for the workforce of Hong Kong.

Why is MPF important? Hong Kong has a rapidly aging population and most of our workforce do not have any form of retirement protection. Recognizing the need to provide for the long term financial security of our workforce, the Hong Kong SAR Government has implemented the Mandatory Provident Fund system in year 2000.

Who is covered under the MPF system? Employees aged between 18 and 65 (including both full-time and part-time employees). Self-employed persons aged between 18 and 65.

What are the mandatory contribution rates? Employee's Monthly Relevant Income Employer's Contribution Employee's/Self-employed Person's Contribution Less than HK$5,000* 5% Optional HK$5,000* to HK$20,000 5% 5% Over HK$20,000 5% on HK$20,000 (i.e. HK$1,000) Additional contribution - Optional 5% on HK$20,000 (i.e. HK$1,000) Additional contribution - Optional 5% of employee's relevant income for both employers and employees. Employee's contributions are optional if his relevant income is less than HK$5,000*. 5% of assessable profit for self-employed persons. No mandatory contributions are required from employers, employees and self-employed persons for that portion of relevant income over HK$20,000. Voluntary contributions are allowed under MPF schemes and there are no restrictions on such contribution rate. * Effecitive on February 1, 2003

What are the features of MPF? Vesting Mandatory contributions to MPF schemes are vested to members immediately. The employer is entitled to offset Long Service Payment/Severance Payment out of accrued benefits derived from the employer's contributions in respect of the employee in the MPF scheme. Investment return (profit or loss) derived from the mandatory contributions is also immediately vested to members. 　 Portability The accrued benefits of an employee can have the following options when the employee ceases employment with his/her employer: To retain the accrued benefits within the same scheme; or To transfer the accrued benefits to a scheme in which the new employer has participated; or To transfer the accrued benefits to another registered master trust scheme. 　 Claim Members can receive their accrued benefits in lump sum upon retirement at age 65 (these include their own contributions, the employer's contributions, plus investment return) Members can receive their accrued benefits before 65 under the following circumstances: early retirement after reaching the age of 60 permanent departure from Hong Kong death total incapacity small balance

What are the tax benefits? Employee's and self-employed person's mandatory contributions are tax deductible and the maximum amount is HK$12,000 per year. Employer's contributions are also tax deductible up to 15% of employees' total emoluments.