Information Centre

The MPFA has noticed there is a growing number of employees making tax-deductible voluntary contributions (TVC) in recent years for enjoying tax savings while enhancing their retirement reserves.

MPF scheme members can enjoy a tax deduction under the salaries tax or tax under personal assessment by making TVC, with the tax deduction capped at $60,000¹ per year. In addition to tax savings, the member’s retirement reserves can be further enhanced through the compounding effect on savings and investment over the years by making additional contributions. If an MPF scheme member with a monthly income of $50,000 (annual income of $600,000) makes a $5,000 TVC every month (i.e. $60,000 per year), assuming that the average annualized rate of return is 4.3%²,  it is estimated that nearly $2 million of MPF could be generated from TVC after 20 years³.

According to MPFA figures, the number of TVC accounts and the total contribution amount have been growing steadily every year. The cumulative amount of TVC reached $5.255 billion as of December 2021, which is nearly double that 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 well received by scheme members.

Making TVC is also flexible., Scheme members can decide the frequency and amount of contributions to suit their personal financial circumstances. Eligible persons can open a TVC account in an MPF scheme that offers TVC of their own choice and make contributions directly with the trustees. We encourage the public to open the TVC account via digital means provided by the trustees to avoid unnecessary social contact.

_{1. 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.}

_{2. As at December 2021, the annualized net rate of return of the MPF System was 4.3% since its inception in December 2000.}

_{3. 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.}