More Hong Kong workers make voluntary contributions to MPF as returns shrink by 21 per cent

More Hong Kong workers have made voluntary, tax-deductible contributions to their mandatory pension accounts in the past financial year than during the previous one, while the net returns of the scheme shrank 21 per cent due to market volatility.

The Mandatory Provident Fund (MPF), the compulsory retirement scheme that covers 4.7 million residents, had amassed assets worth HK$1.11 trillion (US$142 billion) as of March 31, compared with HK$1.12 trillion a year ago, according to the operator’s annual report released on Sunday.

The Mandatory Provident Fund Schemes Authority revealed the number of voluntary contribution accounts rose by nearly 10 per cent to 68,000 in 2022-23, while the total amount paid in jumped one-third to HK$8.59 billion from a year ago.

These payments are tax-deductible and employees can choose to contribute any amount at any time. But the money cannot be retrieved until they turn 65 unless conditions on statutory grounds for early withdrawal are met.

“If you contribute voluntarily to the MPF, you have to be careful,” said Simon Lee Siu-po, economist and senior lecturer in accounting and financing at Chinese University.

“Yes, the tax deduction is good, but if you lose on the MPF return, that could be very bad. Success really depends on whether the person understands the mechanism.”

The tax deductible contributions could help members save up to HK$10,200 per year in tax, a ccording to MPF Rating’s chairman Francis Chung.

“Top-ups via the tax deductible contribution accounts need to remain in the system until retirement, but it effectively pays MPF members to save for retirement ,” he said. “Such incentives are crucial to empower MPF members to be proactive in saving for their own retirement.”