What are MPF voluntary contributions — and why did a 2012 report call for more?

In May 2012, an industry-commissioned Ernst & Young study of Hong Kong’s MPF system made an unusual plea: contribute more than the law requires. After 11 years the system had over 2.5 million members, HK$365 billion in assets and 99 per cent employee participation — yet the report said bigger contributions were needed.

What are MPF voluntary contributions?

MPF voluntary contributions are extra payments employers or employees make into an MPF scheme on top of mandatory contributions. In 2012, mandatory contributions were 5 per cent from each side; voluntary contributions were anything above that statutory floor. At the time, employees could not claim tax deductions on voluntary contributions.

Why did the 2012 report call for higher contributions?

The study found one- and five-year investment performance beat overseas retirement plans, but three-year performance lagged — hit by the global financial crisis and a heavy tilt toward Hong Kong equities. With about 24 per cent of assets parked in low-risk bond and money-market combinations, and retirement systems worldwide taking about 40 years to mature against Hong Kong’s 11, raising mandatory and voluntary contributions — and the maximum income level — was the most direct way to grow the pie.

Mandatory vs voluntary contributions