10 February 2023
A Beginners Guide to MPF Filing Hong Kong
A Beginners Guide to MPF Filing Hong Kong
The Hong Kong Mandatory Provident Fund (MPF) is basically a retirement savings scheme for Hong Kong employees designed to provide them with a safety nest after they retire from active employment. As the name suggests, it’s mandatory, and most employees in Hong Kong are required to make contributions to the fund from their income. This particular article is intended to provide a comprehensive understanding of the MPF Filing Hong Kong and will include such pieces of information as eligibility, deadlines, exemptions, relevant remittance rates, and the calculation of contributions.
The MPF system was introduced to ensure that employees in Hong Kong can have access to their retirement savings in their later years. Understanding what MPF is, its benefits, and how to go about MPF filing Hong Kong is essential in helping employees make informed decisions about their retirement planning and that whatever they do during their employment years is geared towards achieving their overall pension goals.
What you need to know about the MPF system
As earlier mentioned, the Mandatory Provident Fund (MPF) is a retirement savings scheme designed to provide HK employees with a safety nest during their retirement years. The MPF system is such that both employers and employees contribute to the fund. It’s a requirement that employers make a contribution of 5% of the employee’s pay/salary to the fund. Consequently, employees are also expected to contribute 5% of their salary in a given month to the MPF.
The contributions made don’t just lie idle in a savings account. No. The funds contributed are invested in various profitable financial products such as bonds and stocks with the sole aim of ensuring that the funds grow over time. It’s instrumental in the sense that after retirement, employees have a safety nest and can continue enjoying the things they enjoyed when employed without struggling. MPF contributions are paid or remitted monthly.
A look Into the MPF Contributions Requirements
The majority of those in employment in Hong Kong are eligible for the Mandatory Provident Fund (MPF). Whether you are a casual, full-time, or part-time employee, MPF contributions are mandatory. However, self-employed individuals and foreign domestic workers are exempted from making MPF contributions.
MPF Contribution Rate
The employer and the employee are both required to make a minimum contribution of 5% of the employee’s salary to the MPF. Based on the existing agreement between employer and employee, the payment can be combined to meet the minimum requirement or the employer can choose to pay a higher contribution.
MPF Contribution Deadline
MPF contributions are made monthly and the deadline is the last day of the month. Generally, employers are responsible for making contributions on behalf of their employees and it’s essential that such remittance is made on time or within the stipulated period.
MPF contribution exemptions
While we had mentioned that all casual, part-time, and full-time employees in Hong Kong are required by law to make contributions, there are certain circumstances under which an employee may be excused from remitting MPF contributions. For instance, if one is on maternity leave or is ill and therefore unable to work, they are exempted from making MPF contributions.
Secondly, foreign nationals in Hong Kong whose stay is less than 13 months are not required to contribute to the fund. Consequently, employers have a responsibility to ensure that not only are correct contributions made but that exemptions are accurately recorded.
Calculating your MPF contributions
When we talk about the MPF contributions calculation, we are simply talking about the process of determining the amount that an employee will contribute to the MPF scheme. An employee is required to contribute 5% of their paid salary to the MPF. An employer is also required to contribute 5% of the employee’s salary to the MPF scheme. Both employer and employee contributions can be combined in order to meet the MPF minimum contribution requirement.
How do you determine your MPF contribution as an employee?
To determine the exact amount you are required to contribute to the MPF, you need to calculate 5% of your taxable salary. Your taxable salary includes your basic salary, bonuses, and allowances. In a situation where you have multiple sources of income, say from a business or company you are operating on the side, your MPF contribution will be calculated based on your total taxable income.
Important tips for maximizing your MPF contributions
While it’s okay to make the mandatory contributions as per by law, you can choose to also make voluntary contributions to ensure that by the time you retire, you have a healthy safety net to see you through retirement. Some of the important tips that will see you maximize your MPF contributions include:
- Going about and beyond the minimum 5% MPF contribution. You should endeavor to contribute more than what is stipulated by law. Voluntary contribution especially if you are a casual worker is key.
- Review your MPF portfolio regularly and make any necessary changes to maximize your returns.
- Diversifying by considering other saving options. You need not just rely on MPF contributions for your retirement plan. You could also consider personal savings, and term life insurance plans, Money market funds, to mention a few that will complement your pension during rainy days.
- Invest in a mix of high-risk and low-risk funds with the goal of ensuring that you get the most out of your investments.
The ultimate goal is ensuring that your retirement years are a breeze and that begins by doing what is necessary today to secure your retirement years.
Keeping track of your MPF Contributions
If you are in the MPF scheme, it, therefore, follows that you must keep track of your contributions to see the progress you are making and areas that you need to improve in order to maximize returns. To do this, you need to check your MPF contribution statement. This is a statement that typically provides you (the employee) with a summary of all your contributions as well as your investments.
This very important document is issued on an annual basis and provides information on the:
- Contributions amount made within a given period.
- Investment returns.
- MPF account current balance.
Why it is Important to Review Your Contribution History
As an employee in Hong Kong, reviewing your contributions regularly is very crucial. The single most important reason to review your MPF contributions is to ensure that correct contributions are being made and that your MPF investment portfolio is aligned with your overall retirement goals. Additionally, a review of your contributions is instrumental in helping you identify any discrepancies or errors and taking the necessary steps or actions to resolve any issues.
Accessing and Reviewing Your MPF Records
You can access your MPF records through the mobile app or the MPF scheme website. The MPF records provide you with a complete history of your contributions, your investment returns, and other important information regarding your contributions. All you need to do to access your MPF records is to log into your account and view your MPF contribution statement.
Choosing the Right MPF Scheme
As an employee in Hong Kong, there are a number of different MPF schemes you can choose from. Each of the schemes has its own set of benefits, investment options, and fees. Other than the popular Mandatory Provident Fund schemes, you can also choose Occupational retirement schemes or approved provident fund schemes.
It is imperative to note that each of the MPF schemes in Hong Kong has its own pros and cons. As such, it is recommended that you weigh your options before you settle on one that best suits your retirement goals. For instance, Mandatory Provident Funds are regulated by the government and offer a wide range of investment options and benefits. Approved provident funds on the other hand are flexible in terms of their fees and investment options.
That said, choosing the best MPF scheme that aligns with your needs requires consideration of a number of factors. These are:
- Personal financial situation
- Risk tolerance
- Investment options available
- Investment goals
- Fees associated with each scheme
- Guidance and support provided by each scheme
The Bottom Line
As an employee in Hong Kong, the MPF system plays an integral role in ensuring that you have a soft landing after you are done with active employment. It provides you with an opportunity today to make contributions, invest the same, and ensure you maximize returns for a safety net during retirement years. Understanding how the MPF system works is instrumental in making informed decisions about contributions and ensures that you are on track to achieving your retirement investment goals!
At Primasia, we have the expertise in MPF filing Hong Kong ensuring that we help you realize your retirement goals. We also advise on what you need to do in order to maximize your MPF contribution by advising on investment options that will give you the best returns on your MPF contributions. Our goal is to ensure that you are well versed with the tax laws regarding MPF filing Hong Kong, guide you on how to fill MPF form, how to make payment or contribution, which MPF trustee is the best, and so on and so forth. Your retirement planning should start today. Let us hold your hands and help you achieve your retirement goals!
A Beginners Guide to MPF Filing Hong Kong The Hong Kong Mandatory Provident Fund (MPF) is basically a retirement savings scheme for Hong Kong employees designed to provide them with a safety nest after they retire from active employment. As the name suggests, it’s mandatory, and most employees in Hong Kong are required to make […]