MPF contribution rise: maximum relevant income up to HK$25,000, monthly cap HK$1,250

This article is a rewrite of a report from June 2012.

Revised MPF mandatory contribution levels took effect on 1 June 2012: the maximum relevant income for monthly-paid employees rose from HK$20,000 to HK$25,000, lifting the mandatory contribution cap from HK$1,000 to HK$1,250 a month.

MPF contribution rate: what changed for employees?

Employees earning over HK$20,000 a month would have up to HK$250 more deducted as employee mandatory contributions — up to HK$500 more in total retirement savings a month (HK$250 each from employer and employee). The original columnist advised workers to check their June payslips onward to make sure employers contributed correctly, following up with employers first and calling trustee hotlines with questions.

Assuming 5 per cent average annual investment return and 3 per cent inflation, the present value of extra monthly contributions at retirement:

Would voluntary contributions be affected?

Yes. Where employers set total mandatory-plus-voluntary contributions as a fixed percentage of salary, a higher mandatory slice meant a smaller voluntary one:

(Assuming 5 per cent combined employer contributions)

What did employers need to do?

This was the first maximum-income revision since MPF launched in 2000, affecting more employees than the minimum-income revisions. Employers with in-house payroll or MPF software needed flexible systems for future adjustments — and timely updates most of all, since underpaying past the monthly contribution day (the 10th) could trigger surcharges or fines. The MPFA said it would step up enforcement and education to protect members.