PrepLicense: HK MPF · Study Notes · Chapter 3
MPF Chapter 3: Key Features of the MPF System
This chapter is the largest in the syllabus, covering mandatory contribution rules, definition of relevant income, contribution holidays, vesting of benefits, preserved accounts, withdrawal rules, and account consolidation.
1. Mandatory Contribution Rate and Income Caps
Employees and employers each contribute 5% of relevant income. Below the minimum relevant income level, employees are exempt but employers must still contribute 5%; income above the maximum is not contribution-bearing. Levels are periodically revised by Government against inflation.
2. Definition of Relevant Income
Includes basic salary, end-of-contract gratuity, commission, attendance bonus and discretionary double pay/bonuses. Severance and long service payments may partly offset against accrued benefits.
3. 60-Day Exemption Period
New employees are exempt from contributions for the first 60 days, but employers must enrol them within the statutory period after day 60. Casual employees follow a different arrangement.
4. Contribution Records and Payment Dates
Monthly contributions must be paid by the 10th day after the end of the contribution period. Trustees must issue a monthly statement/confirmation to members within 7 business days of receipt.
5. Voluntary Contributions
Members or employers may make voluntary contributions in addition to mandatory ones, with flexible withdrawal rules subject to scheme terms.
6. Tax-Deductible Voluntary Contributions (TVC)
TVC accounts are opened directly by members. The maximum tax-deductible amount per year of assessment is HK$60,000 (shared with qualifying deferred annuity premiums). Funds are locked until age 65 except where statutory early-withdrawal grounds apply.
7. Vesting and Preservation of Benefits
Employee mandatory contributions and investment returns vest 100% immediately. Employer mandatory contributions also vest 100% immediately; voluntary employer portions may follow a vesting schedule per scheme terms.
8. Preserved Accounts
On leaving employment, accrued benefits in the original account can be preserved as a personal account, transferred to the new employer's scheme, or transferred to a scheme of the member's own choice (via the Employee Choice Arrangement).
9. Withdrawal at Age 65 or Above
Members may take a lump sum, draw down in instalments, or keep benefits invested in the scheme.
10. Statutory Grounds for Early Withdrawal
Permanent departure from Hong Kong, total incapacity, terminal illness, small balance (under HK$5,000 with no contributions in the past 12 months), early retirement (age 60+), or death.
11. Employee Choice Arrangement (ECA)
Once per calendar year, members may transfer the accrued benefits derived from employee mandatory contributions from the employer-chosen scheme to a scheme of their own choice, enhancing market competition and member choice.
12. Consolidation of Personal Accounts
Members may apply to consolidate personal accounts held with multiple former-employer schemes into a single trustee scheme for easier management.
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