MPF voluntary contributions: Convoy’s 2011 call for a tax deduction

In late November 2011, LegCo approved raising the MPF maximum relevant income from HK$20,000 to HK$25,000, effective 1 June 2012. But Convoy Financial Services’ chairman said the ceiling was still too low, and urged the government to encourage voluntary contributions with a tax break: employee voluntary contributions of up to 5% of income would be tax-deductible, with no cap on the amount.

What are MPF voluntary contributions?

MPF voluntary contributions are extra payments on top of the mandatory 5%-from-employer, 5%-from-employee contributions. In December 2011 Convoy Financial proposed making employee voluntary contributions of up to 5% of income tax-deductible with no cap, so all earners could save more for retirement; 52% of survey respondents would contribute more if tax-exempt.

The proposal

Convoy’s pitch had two limbs: first, employee voluntary contributions of up to 5% of income would qualify for tax deduction; second, no cap on the deductible amount, so different earners could provide for retirement according to their means. The chairman argued that even after the upcoming rise in the maximum relevant income, the contribution ceiling remained low — only a tax incentive would genuinely move people to contribute more voluntarily.

The wider reform package

Beyond the tax break, Convoy tabled proposals to accompany “semi-portability” in 2012: relax MPF investment restrictions and widen product choice; move step by step towards full portability; and build an administrative platform so employees could choose their MPF service provider directly. The chief executive welcomed tougher regulation of unlicensed salespeople ahead of semi-portability, to protect contributors’ interests.

Market outlook: cautiously pessimistic

The chairman described his 2012 market outlook as “cautiously pessimistic”. The firm said it would not lay off staff, but would inevitably slow hiring and trim some promotional spending. See the MPF education guides for today’s voluntary-contribution arrangements.