Ah-Yan has found her first full-time job as a clerk, with a monthly salary of HK$6,500. When she arrives for her first day's work, her employer asks her to complete a Mandatory Provident Fund (MPF) enrollment form and return it to the trustees through the firm. She isn't familiar with this system and wants to find out more.
We will start with the MPF system's key features. MPF coverage operates on a per employment basis, covering employees aged between 18 and 65 who are in employment for 60 days or more. It also covers casual construction and catering industry workers who are employed for under 60 days.
The system requires employers and employees to contribute an amount equal to five percent of the employee's relevant income. The employee's contribution is subject to a minimum relevant income level of HK$5,000 per month, while both employee and employer are subject to a maximum relevant income level of HK$20,000 per month. Contributions are made to the employer's chosen Mandatory Provident Fund Schemes Authority (MPFA) approved trustee.
(Now revised: With the MPF amendments taking effect on 1 November 2011, the employee's contribution is subject to a minimum relevant income level of HK$6,500 per month. With further amendments taking effect on 23 November 2011, both employee and employer are subject to a maximum relevant income level of HK$25,000 per month.)
All MPF schemes are privately managed by approved trustees and regulated by the MPFA under the Mandatory Provident Fund Schemes Ordinance.
Although Ah-Yan now understands the MPF system, she wants to learn how schemes operate and how she can ensure that her contributions are paid to the trustee.
Since she is a new employee, she must complete the MPF scheme enrollment form issued by her employer's chosen trustee. In addition to her personal details, she must indicate her investment choice from the selection of funds offered by the trustee.
Once she becomes a member of the scheme, the trustee will issue her with a membership certificate within 60 days. She should carefully check data such as personal details and the scheme's name and immediately inform the trustee if there is a discrepancy.
As a new employee, Ah-Yan is entitled to a 30-day contribution holiday. If this expires within the pay cycle (in her case, a calendar month), the whole pay cycle contribution is waived.
As Ah-Yan's monthly salary is HK$6,500 (above the minimum relevant income level under the MPF system) she must contribute five percent, or HK$325 a month. Every month, her employer will deduct HK$325 from her salary and add another HK$325 as his five percent contribution - HK$650 in total. This sum will be remitted to the trustee no later than the tenth day of the following month.
Her employer must provide her with a monthly pay record no later than seven working days after the contribution is made. This should detail her relevant monthly income, her contribution and her employer's contribution and when this was made.
The trustee must provide Ah-Yan, as a scheme member, with an annual benefit statement within three months of the end of the scheme's financial year. Among other items, this lists the total contribution amount and the value of benefits accrued over the year.
Meanwhile, she can always check her contributions and investment performance with the trustee by telephone or e-mail.
If she wishes to change her chosen investment, the trustee must allow her to switch her investment portfolio for free at least once a year. More than one investment portfolio switch a year will be subject to the scheme's governing rules, detailed on the trustee's customer hotline.
Ah Yan has another question. How should she handle her MPF contribution when she moves jobs?
She has three options. She can leave it with her ex-employer's scheme as a preserved account, transfer it to her new employer's chosen scheme or transfer it to the scheme of her own choice as a preserved account.
For find out more, please visit the MPFA website at www.mpfahk.org
|Q & A on the MPF system|
|Q1 ||Can I trust approved MPF trustees?|
|A1 ||The entire MPF system is based on the concept of trust law. Approved MPF trustees owe fiduciary duties to scheme members. MPFA approved trustees meet stringent eligibility requirements and scheme members' assets are separate from those of the trustees. All trustees must acquire adequate insurance to indemnify scheme members against losses resulting from any breach of trust or illegal conduct by MPF trustees or persons concerned with scheme assets administration. As a last resort, scheme members suffering from losses caused by illegal conduct can seek compensation from the MPF Schemes Compensation Fund. |
|Q2 ||Are there any tax benefits for employees?|
|A2 ||An employee's mandatory contributions are tax-deductible, up to a maximum amount of HK$12,000 per annum. (Now revised: From 2013/14 onwards, contributions are tax-deductible up to a maximum amount of HK$15,000 per annum.) |
|Q3 ||What can an employee do if an employer does not make an MPF contribution after deducting the employee's contribution?|
|A3 ||If they suspect that their MPF rights are being infringed, employees are encouraged to report to the MPFA as early as possible. Complainants' identities and details remain confidential. The MPFA hotline is tel: 2918 0102. |