Hong Kong: Review of Contribution Levels to Pension Fund Begun

By Duncan A. W. Abate and Hong Tran © Mayer Brown JSM January 5, 2018
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Hong Kong: Review of Contribution Levels to Pension Fund Begun

Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), employers and employees in Hong Kong are each required to make a monthly contribution of 5 percent of the employees' relevant income to an MPF Scheme (pension fund). However, this is subject to the minimum and maximum levels of relevant income, which currently stand at HK$7,100 ($908) and HK$30,000 ($3,836) respectively.

An employee whose relevant monthly income is less than the minimum level is not required to make any contribution, even though the employer remains obliged to do so. Meanwhile, where the employee's relevant income exceeds the maximum level, the employee, together with the employer, will not be required to contribute for the portion in excess of HK$30,000. Therefore, they will each be required to pay the maximum monthly contribution, i.e., HK$1,500 ($192).

In accordance with section 10A of the MPFSO, the Mandatory Provident Fund Schemes Authority (the MPFA) is required to conduct a review of both the Minimum and Maximum Relevant Income every four years. The MPFA has kick-started the said review and will submit its proposal to the government for consideration by July 2018.

In considering whether the relevant income levels should be adjusted, the MPFA must observe the following factors under Section 10A:

  • In respect of the Minimum Relevant Income, 50 percent of the monthly median employment earnings prevailing at the time of review.

  • In respect of the Maximum Relevant Income, monthly employment earnings at 90th percentile of the monthly employment earnings distribution prevailing at the time of the review.

The MPFA now proposes to increase both the Minimum Relevant Income and Maximum Relevant Income to HK$8,000 ($1,023) and HK$45,000 ($5,754) respectively. If the proposal is adopted by the government, an employee whose monthly relevant income exceeds HK$45,000 (together with the employer) would need to pay up to HK$750 ($96) more mandatory contributions per month to the MPF scheme.

The MPFA is currently seeking views from the stakeholders on the implementation arrangement of the Maximum Relevant Income, in particular whether it should be adjusted upwards in one go, or progressively in two or three phases.

Duncan A. W. Abate and Hong Tran are attorneys with Mayer Brown JSM in Hong Kong. © 2018 Mayer Brown JSM. All rights reserved. Reposted with permission of Lexology.

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