Changes to pension regulation

Find the latest pension regulation updates that affect your investments. It's important to keep abreast of any industry changes so you can make adjustments as needed.

Changes to pension regulations

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Default Investment Strategy effective in April 2017

The Mandatory Provident Fund Schemes (Amendment) Ordinance 2016 (the “Amendment Ordinance”) came into effect on 1 April 20171 when the Default Investment Strategy (DIS) was launched. Each MPF scheme is required to offer the DIS to scheme members as an investment choice. For scheme members who have not provided MPF investment instructions, their MPF benefits will be invested in accordance with the DIS. All scheme members may also choose to invest in accordance with the DIS at any time. A DIS Pre-Implementation Notice was sent to you by January 2017 explaining how the DIS may affect your MPF investments. 

The DIS has the following three important features: 

  • Fee caps: DIS funds are subject to fee caps. Under the law, management fees chargeable to the funds are capped at a maximum of 0.75% of the net asset value of the funds on a yearly basis, while fees for recurrent operational expenses are capped at 0.2% on the same basis. 
  • De-risking: The DIS has a de-risking feature. Members who invest through the DIS will have all of their contributions invested in the Core Accumulation Fund (CAF) until they reach the age of 50, from which point their investments will be gradually moved to Age 65 Plus Fund (A65F). By the time the members reach age 64, all of their MPF benefits will be invested in A65F. 
  • Globally diversified investment: the DIS adopts a globally diversified investment approach. This means that both equities and bonds will be broadly diversified across different geographic regions. 

The Mandatory Provident Fund Schemes (Amendment) Ordinance 2016 (Commencement) Notice has been tabled at the Legislative Council on 19 October 2016 for negative vetting. The vetting period is expected to expire in/ before December 2016.

Increase of maximum Relevant Income Level for MPF contributions

With effect from 1 June 2014, the maximum relevant income* level for MPF contributions was increased. For employees with a monthly relevant income of more than HK$25,000, and their employers, the amount of mandatory contributions payable by them was increased.

For contribution periods starting on or after 1 June 2014, MPF contributions are calculated according to the following table:

Monthly-paid employees and their employers
Monthly relevant income Amount of mandatory contributions
Employer's contributions Employee's contributions
Less than HK$7,100 Relevant income x5% Not required
HK$7,100 - HK$30,000 Relevant income x5% Relevant income x5%
More than HK$30,000 HK$1,500 HK$1,500

Source: Mandatory Provident Fund Schemes Authority, ˝Maximum Relevant Income Level for MPF Contributions Increased to HK $30,000 Monthly˝ leaflet (March 2014) 

*"Relevant income" refers to any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite or allowance, expressed in monetary terms, paid or payable by an employer, but excluding severance payments or long service payments under the Employment Ordinance
 

Change of Minimum Level of Relevant Income for MPF Contributions

The Legislative Council has passed the amendment of the minimum level of relevant income1 for Mandatory Provident Fund (MPF) contributions, with the minimum level of relevant income revised up to HK$7,100 from HK$6,500 monthly, effective 1 November 2013.

For contribution periods starting on or after 1 November 2013, MPF contributions are calculated according to the following table:

Monthly-paid employees and their employers
Monthly relevant income Amount of mandatory contributions
Employer's contributions Employee's contributions
Less than HK$7,100 Relevant income x 5% Not required
HK$7,100 - HK$25,000 Relevant income x 5% Relevant income x 5%
More than HK$25,000 HK$1,250 HK$1,250

Source: Mandatory Provident Fund Schemes Authority, 'Minimum Level of Relevant Income for MPF Contributions Increased to $7,100 Monthly' leaflet (August 2013) 

1Relevant income' refers to any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (including housing allowance or other housing benefit), expressed in monetary terms, paid or payable by an employer, but excluding severance payments or long service payments under the Employment Ordinance.

Employee Choice Arrangement

The Legislative Council has passed the Mandatory Provident Fund Schemes (Amendment) (No.2) Bill 2011 and the Employee Choice Arrangement ("ECA") will come into effect on 1 November 2012.

Employees have greater autonomy in managing their MPF investments and they are allowed to transfer the accrued benefits derived from the employee mandatory contributions made by them during their current employment held in the contribution account of their employer's selected MPF scheme to a scheme of their choice.

The table below illustrates the impact of ECA to an employee's contribution account:

Type of accrued Before ECA After ECA
Employer mandatory contributions Not transferable Not transferable
Employer mandatory contributions Not transferable Transferable in a lump sum once every calendar year (1 January to 31 December)
Mandatory contributions accrued during former employment Not transferable again Transferable in a lump sum at any time

 

The Mandatory Provident Fund Schemes Authority has prepared a leaflet; members and employers may visit www.mpfa.org.hk for more details.

This information is for existing clients for reference only. This contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. While great care has been taken to ensure that the information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. Opinions and forecasts are subject to change without notice.