Most Read Contributor in Hong Kong, September 2016
Keywords: MPF, amendment bill, Hong Kong,
If passed, the Mandatory Provident Fund Schemes (Amendment)
Bill, gazetted on 27 June 2014, will introduce some fundamental new
concepts into Hong Kong's Mandatory Provident Fund system. In
particular it will introduce a new circumstance in which benefits
can be paid (terminal illness) and allow a new manner of payment of
benefits (a phased withdrawal as opposed to the current lump sum
In addition the MPF Amendment Bill will make changes to the
existing legislation to enable trustees of schemes to comply with
the FATCA reporting obligations.
1. Changes to the circumstances in which MPF benefits can be
Currently MPF benefits are payable only in the following
circumstances, when the member in question:
has reached age 65;
has reached age 60 and ceased work;
is permanently leaving Hong Kong; or
has become totally incapacitated.
It is proposed that an employee can take the full amount of his
or her MPF benefits if he or she is diagnosed with a "terminal
illness". A "terminal illness" is an illness which
is likely to reduce life expectancy to 12 months or less.
This change makes sense. It should not be unduly cumbersome to
2. Manner of payment of MPF benefits
Currently MPF benefits are always paid in the form of a single
lump sum payment.
It is proposed that a member will be able to "phase"
his or her withdrawal of MPF benefits, rather than being required
to receive the lump sum in a single, one off, lump sum. Upon
becoming entitled to benefits a member can make up to 12
withdrawals each year with no additional fees and no tax
This enables individuals to avoid having to draw down their
accrued benefits in one lump sum. The existing system mandates such
form of payment. Hopefully this will be a precursor to some kind of
genuine drive to introduce annuities into the Hong Kong market. In
reality we recognise this will only happen with an overhaul of the
current tax regime.
3. Disclosure provision
Currently the MPF legislation and Occupational Retirement Scheme
Ordinance (ORSO) restrict the manner in which a trustee or scheme
administrator can use personal data collected concerning members of
the scheme. Such uses do not include the provision of such data to
an overseas tax authority.
The Foreign Accounts Tax Compliance Act (FATCA) obliges trustees
to make certain disclosures to the US Internal Revenue Service in
Both the MPF and ORSO legislation will be changed to permit
trustees to make FATCA (and "FATCA-type") disclosures
This change is an inevitable result of the staggeringly
intrusive FATCA legislation.
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
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