Mandatory Provident Fund in Hong Kong

Do you know that the Mandatory Provident Fund (強積金, MPF for short) is a compulsory saving scheme for Hongkongers? The saving is for the retirement…well, supposed to be for retirement.

It was officially implemented on December 2000. Hongkongers have an employment contract of 60 days or more are obligated to join the scheme. Under the scheme, both employers and employees have to pay a total amount equal to 5% of the employees’ salary. The MPF providers will then use the sum as investment fund.

The fund is portable. When the employees change jobs, the accumulated fund will be transferred to the plan operated by the new employers. While employees can allocate the fund asset, they have no direct control over the investment. And employees won’t be able to withdraw the accrued benefit until they are 65 (the official retirement age in Hong Kong).

The scheme sounds comprehensive, but the effect is…um, let me put it this way: it sucks.

Since the fund providers don’t really care about your investment, how much you can get by your retirement is unstable and luck-dependent. And the investment return is just too negligible when you compare it with the ever-increasing living cost and life expectancy in Hong Kong. Not to mention that the actual amount a retired Hongkonger can get would be further reduced because of the high fund management charges. Oh, and don’t forget the offset mechanism, which allow the employers to pay their employees’ severances and long-term serving payment with the fund instead.

See that no one except the fund providers actually benefit from the scheme?

Calling it “ineffective” or even “unfair” would be an understatement. That is why employees in Hong Kong simply call it “Raping Provident Fund” (強姦金).

You have to admit, that’s far more accurate.