What Is MPF? The System, Contributions and Returns in One Read

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

What is MPF? Hong Kong’s Mandatory Provident Fund, launched December 1, 2000, is the city’s compulsory retirement system: a textbook case of mandatory enterprise annuities, built as the population ages.

Who contributes, and how much?

Employees and self-employed aged 18–64; 5% from each side. Under MPF law, full-time or part-time employees aged 18 to 64 employed for 60 days or more, plus the self-employed, must join. Employers and employees each contribute 5% of the employee’s income; the self-employed pay 5%, monthly or yearly. At the statutory retirement age of 65, members withdraw their accrued benefits in a lump sum.

How big is it?

HK$336.9 billion, covering 99% of employers. A decade in, MPFA statistics to end-September 2011 showed 99% of employers, nearly 100% of employees and 74% of the self-employed enrolled, with HK$336.9 billion in net assets.

Has it beaten inflation?

5.5% annualised, versus 0.7% inflation. To end-2010, the whole MPF system delivered 5.5% annualised after fees and charges — above the period’s 0.7% annual inflation. Over the long run, MPF as a whole beat inflation.

What is the lesson from 2012?

The system is compulsory; the growth is yours. The 2012 primer’s message was plain: MPF only provides the frame — how much goes in, which funds, when to review, all of it is the member’s homework. Mandatory contributions are the starting line, not the finish.