Why 1 May 2025? The Shared Birthday of Offsetting Abolition and Full Portability

Track 1 — Data X-Ray | Full Portability Series

On 16 October 2026 the government gazetted 21 December 2026 as the implementation date for Phase One of MPF “full portability”. Only one group qualifies: employees hired on or after 1 May 2025.

Why that date? Not 1 January 2025, not 1 January 2026, but 1 May 2025.

The answer is not administrative convenience. It is the tombstone of another reform: 1 May 2025 is the day the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 took effect — the transition date for abolishing the MPF offsetting arrangement. The two dates are the same date because they decide two fates of the same pot of money.

One pot of money, two legal identities

Before the abolition, the employer’s 5% monthly contribution (capped at HK$1,500 per month) was, in the eyes of the law, first and foremost the employer’s severance-payment reserve. When you were laid off or left after five years, the employer could use those accrued benefits to offset the severance payment (SP) or long service payment (LSP) owed to you. That was “offsetting”.

LegCo passed the amendment bill on 9 June 2022. From 1 May 2025, employers may no longer use accrued benefits from mandatory contributions to offset SP/LSP attributable to service after the transition date. But the law also built a “grandfathering” arrangement:

• Employees hired before 1 May 2025: employers may still use accrued MPF contributions (mandatory plus voluntary, whenever made) to offset the pre-transition portion of SP/LSP.
• Service from 1 May 2025 onwards: SP/LSP must be paid by the employer out of its own funds. The formula is unchanged — two-thirds of monthly wages (capped at HK$22,500, so no more than HK$15,000 per year of service) multiplied by years of service, with a total statutory cap of HK$390,000.

To cushion employers, especially micro-enterprises and SMEs, the government set up a 25-year subsidy scheme totalling HK$33.2 billion (1 May 2025 to 30 April 2050): for the first three years, within an employer’s first HK$500,000 of annual SP/LSP expenditure, the employer’s share is capped at HK$3,000 per employee with the government reimbursing the balance; a separate formula applies above HK$500,000, with ratios stepping down thereafter.

See it now? For anyone hired before 1 May 2025, the employer-contribution balance remains, in law, the employer’s offsetting reserve — the buffer against pre-transition SP/LSP liabilities. Let that money move freely to a scheme of the employee’s choosing and the buffer is hollowed out; the grandfathering arrangement would be a dead letter.

That is the real reason Phase One covers only those hired on or after 1 May 2025: this cohort’s employer contributions have lived in the post-offsetting world since month one — clean, unencumbered, safe to hand back to the employee.

One month’s difference in hire date, HK$153,600 over thirty years

Legal identity translates into money through the fee gap. The market-average fund expense ratio is 1.36% (HSBC, May 2026); the Default Investment Strategy’s actual average is about 0.77% (MPFA Chairman, September 2026) — a 0.59 percentage-point chasm.

An illustrative sandbox: employer contributions at the HK$1,500 monthly cap, 7% gross return. Trapped at 1.36% versus free to move to 0.77%:

• 10 years: about HK$7,400 apart
• 20 years: about HK$44,500 apart
• 30 years: about HK$153,600 apart

A HK$250,000 employer-contribution balance costs roughly HK$1,475 a year in extra fees at the wider spread.

In other words: hired on 30 April versus 1 May — one month apart — and the employer-contribution portion of the balance can differ by HK$153,600 after thirty years. Not because of investment skill, but because of where the legislation drew its line.

The playbook after 21 December: different scripts for different sides of the line

Script one: you were hired on or after 1 May 2025. From 21 December you get, once per calendar year (more if your scheme’s governing rules allow), the right to transfer the entire accrued benefits from your current employer’s mandatory contributions — out of the employer’s scheme contribution account and into a personal account at a scheme you choose. Mind the execution details: a transfer takes roughly one to two weeks in transit, during which the money is out of the market — avoid rate-decision weeks and the Christmas–New Year holiday blackout; do not let the launch week’s settlement collide with public holidays.

Script two: you were hired before 1 May 2025. Your employer-contribution portion waits for Phase Two (the government aims to table a bill in mid-2027). But you are not without moves today: the employee-contribution portion has always been movable under the Employee Choice Arrangement (ECA), once a year. And inside your current scheme, switch the funds in your contribution account to the cheapest options available there — switching funds within the same scheme carries no transit market-exposure risk.

This week’s checklist, common to both scripts:

1. Check your hire date: 1 May 2025 is the watershed that decides which script you follow.
2. Check your scheme’s fees: find the fund expense ratio on your current contribution account and hold it against the 1.36% market average.
3. Lock in your target: use mpf.hk’s fee-history data to identify the low-fee scheme you want to move to; when the gate opens on 21 December, the first move is to open the personal account at the destination scheme.

The full-portability cut-off was never drawn casually. It is the settlement date of Hong Kong MPF’s largest legacy account — offsetting. While the old account is unsettled, the money cannot move; only the clean new account is free to go. Understand the line, and you understand which side of it you stand on.