Chapter 1: Introduction to the MPF System

Why: According to Section 1.4 of the Study Notes, the World Bank's 1994 three-pillar framework defines Pillar Two as 'a mandatory, privately-managed, fully-funded contribution scheme.' The MPF System was designed precisely on this template and is therefore a Pillar Two system. Even after the World Bank expanded the framework to five pillars in 2005, MPF remains the second pillar. Option A describes Pillar One (a publicly-financed safety net such as CSSA), which is not a contribution-based scheme like MPF. Option D refers to Pillar Four under the 2005 five-pillar framework, not the 1994 three-pillar framework referenced in the question.

Why: Per Section 1.5(b) of the Study Notes, a relevant employee earning less than the minimum relevant income level (HK$7,100/month) is not required to make mandatory contributions, but the employer must still contribute 5% of that employee's relevant income. Mr Chan's HK$6,500 salary falls below the threshold, so he is exempt from contributing while his employer must still contribute 5%. Option A is wrong because the employee is exempt below the threshold. Option B is wrong because the employer's obligation does not disappear with the employee's exemption. Option D reverses the exemption direction — the policy protects low-income workers, so it is the employee (not the employer) who is exempt.