Mandatory provident fund
Mandatory provident fund refers to a pension system that is implemented by the government and aims to provide a certain level of pension income to future retirees. The contributions to the mandatory provident fund are made jointly by employees and employers according to a certain proportion, making it a compulsory pension system.
Definition: The Mandatory Provident Fund (MPF) is a pension system mandated by the government to provide future retirees with a certain level of pension income. Contributions to the MPF are made jointly by employees and employers at a specified ratio, making it a compulsory pension scheme.
Origin: The MPF system originated in Hong Kong in the 1990s. In 1995, the Hong Kong Legislative Council passed the Mandatory Provident Fund Schemes Ordinance, which came into effect on December 1, 2000. The system was established to address the issue of an aging population and to ensure that retirees have basic financial security.
Categories and Characteristics: The MPF is mainly divided into two categories: occupational retirement schemes and personal retirement schemes. Occupational retirement schemes are set up by employers for their employees, with contributions made by both parties; personal retirement schemes are for self-employed individuals or those without an employer, who make their own contributions. Key characteristics of the MPF include: 1. Compulsory: All eligible employees and employers must participate; 2. Long-term: Funds in the MPF account are typically not accessible until retirement age; 3. Investment: Funds in the MPF account are invested to achieve growth.
Case Studies: Case 1: Mr. Zhang works for a private company with a monthly salary of HKD 20,000. Under the MPF system, both Mr. Zhang and his employer must contribute 5% of his salary to the MPF, amounting to HKD 1,000 each per month. Thus, Mr. Zhang's MPF account increases by HKD 2,000 monthly. Case 2: Ms. Li is a freelancer who opts for a personal retirement scheme, contributing HKD 3,000 monthly to her MPF. The funds in Ms. Li's MPF account are invested in various funds to potentially yield higher returns by the time she retires.
Common Questions: 1. Can MPF be withdrawn early? Generally, MPF can only be withdrawn at retirement age (usually 65), but in certain exceptional cases, such as permanent departure from Hong Kong or severe illness, early withdrawal is allowed. 2. What are the investment risks of MPF? The investment risk of MPF depends on the chosen investment portfolio. Different funds have varying levels of risk and return, and investors should choose based on their risk tolerance.
