MPF stands for Mandatory Provident Fund, which is a compulsory savings scheme that covers all employees and self-employed individuals aged 18-sixty four in Hong Kong. You’ll be able to think of it as a safety net for retirement.
The Mandatory Provident Fund Schemes Ordinance (MPFSO) was initiated by the Hong Kong authorities in response to the rapidly ageing workpower back in 1995. The MPFSO creates the framework for implementing employment-associated MPF schemes for workers in the labour pressure to obtain monetary benefits when they retire.
Following the move, the Necessary Provident Fund Schemes Authority (MPFA) was set up in 1998 to administer the operation of the MPF System which was eventually launched in 2000. As of 2015, over eighty five% of the labour force in Hong Kong was safeguarded with some type of retirement protection compared to only 33% in 2000.
Now that you’ve a fundamental understanding of MPF, let’s deep dive into your should do’s (additionally known as your legal obligations), and things you get as an employer in Hong Kong (your entitlements), together with: opening an MPF account, making MPF contributions and MPF tax deduction.
What are the completely different types of MPF Schemes?
There are three types of MPF schemes:
1. Master Trust Schemes
2. Employer-sponsored Schemes
3. Trade Schemes
Master Trust Scheme is the most common type of MPF scheme. It operates by pooling collectively contributions from totally different participating employers and their employees, as well as self-employed individuals, to achieve economies of scale in investments. It’s open to workers whose employers are participating in the Master Trust Scheme, as well as self-employed individuals and individuals with accrued benefits, like sick pay and personal time without work, to be transferred from different schemes.
The Employer-sponsored Scheme, however, is limited to employees of a single employer and its affiliated companies. Because of membership restriction, the scheme is more cost-effective for big corporations.
Trade Scheme is only applicable for workers where labour mobility is high, particularly in the catering and building industries, and particularly informal staff (hired for short-term engagement of less than 60 days or on an ad-hoc foundation). Informal workers will not be required to vary schemes after they change jobs so long as they remain in these industries, provided the old and new employers have registered under the identical industry scheme.
How to decide on which MPF scheme is best for you
Since MPF is supposed to provide retirement benefits to your staff, chances are you’ll want to consider factors resembling firm stability, risk level of funds, miscellaneous expenses and customer assist when it comes to choosing your trustee.
For example, choosing a bank is comparatively low-risk while opting for an insurance firm might provide you with a more diversified investment portfolio. You’ll be able to consult with the list of MPF approved trustees to help you make an knowledgeable decision.
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