MPF Compensation Fund Levy: Government Proposes an Auto Pause-and-Resume Mechanism

In May 2012 the government proposed a mechanism allowing the Mandatory Provident Fund Compensation Fund to suspend and resume its levy automatically: collection would pause once reserves exceeded HK$1.4 billion and restart if reserves fell below HK$1 billion. The proposal was set out in the Mandatory Provident Fund Schemes (General) (Amendment) Regulation 2012, tabled for Legislative Council approval on 30 May 2012.

What is the MPF Compensation Fund?

The MPF Compensation Fund is a statutory fund protecting MPF scheme members, financed by a levy on MPF scheme assets that is ultimately borne by members. Continuing to levy members when reserves are already ample needlessly erodes retirement savings; under the proposed mechanism, collection pauses automatically once reserves hit the ceiling and resumes at the floor, without case-by-case approval.

The proposed trigger levels

A Financial Services and the Treasury Bureau spokesman said the aim was to stop the fund levying members unnecessarily, cutting scheme expenses so that more of members’ contributions go directly toward retirement protection. In the 2012 context — with MPF fees under heavy public scrutiny — any mechanism that trimmed costs was a tangible win for workers.