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MPFA Chairman Mrs Ayesha Macpherson Lau today (27 February) published a blog post mentioning that the scale of MPF assets had been growing continuously, and the amount of average MPF assets held by each scheme member increased by more than 1.5 times¹ over the past 10 years. The blog post also mentioned the MPF System had achieved an 4.3% annualized net rate of return since its inception, which was higher than the annualized inflation rate of 1.8% over the same period. Despite the growth of MPF assets, there are considerable concerns about the adequacy of MPF for retirement protection. Mrs Lau stressed that the MPF System is one of the pillars of the multi-pillar retirement protection framework of Hong Kong. Its aim is to provide basic retirement protection for the working population. The MPF System has to work together with the other pillars, including voluntary savings, to further enhance retirement protection.

Mrs Lau said the MPFA has been encouraging the working population to increase their retirement reserves by making voluntary contributions in addition to mandatory contributions, and noted the growing appetite for making voluntary MPF contributions in recent years. Taking the tax-deductible voluntary contributions (TVC) launched in April 2019 as an example, the cumulative amount of TVC had reached $5.255 billion as of December 2021, which is nearly double that as of December 2020 ($2.715 billion). The number of TVC accounts had also increased by more than 30%, from 44,000 as of December 2020, to 58,000 as of December 2021, indicating that the tax incentive for TVC is attractive to scheme members.

 Mrs Lau pointed out that the working population could enjoy the double benefit of tax savings and larger retirement reserves through TVC. Eligible MPF scheme members can enjoy tax deduction under salaries tax or tax under personal assessment by making TVC, with the tax deduction capped at $60,000² per year. If an MPF scheme member with a monthly income of $50,000 (an annual income of $600,000) makes $5,000 of TVC every month (i.e. $60,000 of TVC per year), with the assumption that the average annualized rate of return is 4.3%³,  it is estimated that nearly $2 million of MPF could be generated from TVC after 20 years⁴.

Mrs Lau pointed out that flexibility in making contributions is the main feature of TVC. Scheme members can decide the frequency and amount of contributions to suit their personal financial circumstances and capability. She encouraged scheme members to seize the opportunity to set up a TVC account and make contributions before the end of the 2021/2022 tax assessment year.

For the full version of the article, please visit the MPFA blog. The blog is in Chinese only.

- Ends - 

27 February 2022

_{1. The average MPF assets held by each MPF scheme member amounted to $258,000 as of December 2021, an increase of 164% from $97,000 as of December 2011.}

_{2. The tax-deductible limit is an aggregate limit for both TVC and qualifying deferred annuity policies (QDAP) premiums. If the account holder has made TVC and paid premiums for QDAP in the same year of assessment, the tax deduction will be applied to the TVC first. Any remaining amount will then be used for the tax deduction on the QDAP premium.} 

_{3. As at December 2021, the annualized net rate of return of the MPF System was 4.3% since its inception in December 2000.}

_{4. The related estimation of MPF is a future value which does not reflect the impact of inflation. The example is for illustration only and does not imply the actual value of MPF generated by making TVC.}