The MPF safety net: how the compensation fund protects members

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

The MPF is most workers’ most important retirement reserve — but what if a trustee’s misconduct wiped out your accrued benefits? The answer, as of 2012, was the MPF compensation fund: a safety net members could claim from.

What is the MPF compensation fund?

The MPF compensation fund is a safety net seeded with a one-off HK$600 million government injection in 1999. It compensates members for losses to accrued benefits caused by misconduct or illegal acts by trustees or related parties — covering both mandatory and voluntary contributions, with no cap on compensation. Trustees pay an annual levy of 0.03 per cent of scheme net asset value, unchanged since the system began in 2000.

How big is it, and has it ever been used?

As of end-July 2011, the fund’s net assets stood at about HK$1.5 billion — and not a single claim had ever been filed. A safety net, in other words, that had never been needed but was always there.

Why switch to a mixed levy model?

After a review, the MPFA proposed a mixed levy model with a reserve floor and ceiling:

When the levy is suspended, the saving flows through to members in lower scheme charges — a direct benefit to workers. More on MPF safeguards: MPF education resources.