MPF stands for Obligatory Provident Fund, which is a compulsory financial savings scheme that covers all staff and self-employed individuals aged 18-64 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 workdrive back in 1995. The MPFSO creates the framework for implementing employment-associated MPF schemes for workers in the labour force to receive monetary benefits once they retire.
Following the move, the Obligatory Provident Fund Schemes Creatority (MPFA) was set up in 1998 to administer the operation of the MPF System which was eventually launched in 2000. As of 2015, over 85% of the labour power in Hong Kong was safeguarded with some type of retirement protection compared to only 33% in 2000.
Now that you have a basic understanding of MPF, let’s deep dive into your must do’s (additionally known as your authorized obligations), and things you get as an employer in Hong Kong (your entitlements), including: 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. Industry Schemes
Master Trust Scheme is the most typical type of MPF scheme. It operates by pooling collectively contributions from different participating employers and their staff, 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 off, to be switchred from other schemes.
The Employer-sponsored Scheme, then again, is limited to workers of a single employer and its affiliated companies. As a consequence of membership restriction, the scheme is more price-efficient for big corporations.
Business Scheme is only applicable for workers where labour mobility is high, particularly within the catering and construction industries, and particularly casual employees (hired for short-term engagement of less than 60 days or on an ad-hoc foundation). Casual employees should not required to change schemes after they change jobs so long as they remain in these industries, provided the old and new employers have registered under the identical business scheme.
How to choose which MPF scheme is best for you
Since MPF is meant to provide retirement benefits on your employees, it’s possible you’ll wish to consider factors comparable to firm stability, risk degree of funds, miscellaneous fees and buyer support when it comes to picking your trustee.
As an illustration, choosing a bank is relatively low-risk while opting for an insurance firm may provide you with a more diversified funding portfolio. You may discuss with the list of MPF approved trustees that will help you make an knowledgeable decision.
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