MPF Contribution Hike: Maximum Relevant Income Raised to HK$25,000 from 1 June 2012

On 23 November 2011, LegCo passed a resolution 41–3 with one abstention raising the MPF maximum relevant income level from HK$20,000 to HK$25,000, effective 1 June 2012. The MPF contribution hike was expected to affect more than 510,000 employees and self-employed persons earning over HK$20,000 a month.

How is the MPF maximum income level calculated?

From 1 June 2012, the MPF maximum relevant income level rose from HK$20,000 to HK$25,000 a month. Employees earning HK$25,000 or more saw their monthly mandatory contribution cap rise from HK$1,000 to HK$1,250 — an extra HK$250 each from employee and employer, with more than 510,000 people affected in total.

How much more? At a glance

Based on Q4 2010 data, 424,600 employees needed to make extra contributions, plus 89,900 self-employed persons — over 510,000 in total. The system was expected to gain about HK$200 million in new monthly contributions, while MPF trustees would earn roughly HK$50 million more a year.

Why raise it? Untouched for a decade

Secretary for Financial Services and the Treasury K C Chan noted the MPF Ordinance requires the MPFA to review the maximum and minimum income levels at least every four years. By statutory factors the maximum should already have been HK$30,000, but economic conditions and lack of consensus had shelved it; the latest review still pointed to HK$30,000, so after consultation the government settled on HK$25,000 as a balance. Notably, the level had not moved since 2000.

The sweetener: higher tax deduction cap

The government would amend the Inland Revenue Ordinance to lift the maximum tax deduction for employees’ and self-employed persons’ mandatory contributions from HK$12,000 to HK$15,000. Separately, LegCo had in June 2011 raised the minimum income level from HK$5,000 to HK$6,500, effective 1 November — employees earning below HK$6,500 need not contribute. Chan also said MPF fees had room to fall, with the MPFA reviewing administration processes, and that the bill regulating MPF intermediaries for semi-portability would go to LegCo shortly.