What is MPF? How Hong Kong’s retirement savings system works

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

By April 2012, MPF had been running for more than a decade — everyone knew the name, but beyond the monthly pay-slip deduction, how many members could answer “what is mpf”, or explain “how does MPF work” in practice? Here is a refresher in five steps, from choosing funds to withdrawal.

What is MPF?

What is MPF? MPF is Hong Kong’s mandatory retirement savings system: employers and employees must contribute based on income, contributions go to a trustee for investment in funds, and accrued benefits can only be withdrawn when statutory conditions — such as reaching 65 — are met. The whole operation turns on five links: choosing funds, contributing, switching funds, transferring schemes, and withdrawal.

What is the MPF contribution rate?

The MPF contribution rate is 5 per cent of relevant income from the employer and 5 per cent from the employee — 10 per cent in total. Employers pass both portions to the trustee and must give employees a monthly contribution record; self-employed persons pay the trustee directly, yearly or monthly. The trustee verifies each payment before handing it to the investment manager to buy fund units.

How does MPF work in five steps?

1. Choosing your investment mix: after joining a scheme, study the constituent funds in the trustee’s principal offering document and allocate contributions by percentage across fund types — or put everything in one. The trustee buys units per your instructions; later changes go through a form or online.
2. Processing contributions: fund dealing windows mean the contribution date and the actual unit purchase date can differ — dealing usually happens on the next dealing day after the manager receives the money from the trustee. Most schemes waive contribution charges; any charge must be fully disclosed in the offering document’s fee table.
3. Switching funds: changing your mix involves two deals — redeeming the old fund, then using the proceeds to buy other constituent funds in the same scheme. Prices follow each dealing day’s net asset value, plus or minus bid-offer spreads (mostly waived now). Three options: redirect future contributions only, switch the existing balance only, or both. Watch for switching limits in guaranteed funds and any trustee or manager fees.
4. Transferring schemes: moving accrued benefits from one scheme to another — old units are redeemed and the money buys units in the new scheme. The four usual cases: (A) changing jobs, moving old benefits into the new employer’s scheme; (B) moving a preserved account to another scheme’s preserved account; (C) an employer replacing its scheme, with members moving along; (D) a self-employed person switching schemes.
5. Withdrawing benefits: money comes out only on statutory grounds — reaching 65, early retirement, death, permanent departure from Hong Kong, total incapacity, or a small balance. Withdrawal means redeeming units; some schemes levy a withdrawal fee or apply deductions, so check the offering document’s fee notes.