MPF vs. ORSO

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  1. #1

    Join Date
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    MPF vs. ORSO

    OK, I'm faced with this horrible choice. Basically, with MPF my employer will contribute $1000/month. With ORSO, they contribute 10%-12.5% of my salary (depending on my own contribution), which is substantially more than $1000/month. However, I'm only entitled to 20% of the employer's contribution after 2 years, which staggers up to 100% after 10 years. If I leave in less than 2 years, I get nothing.

    I figure that break-even between MPF and ORSO is around 3-4 years, which is quite a long time to spend in a high pressure job. Obviously, ORSO is much better in the long-run, while MPF is a sure thing.

    My questions - are employees typically entitled to the employer's contribution if they are terminated in less than 2 years? Can you usually negotiate with a prospective employer for compensation for loss of the ORSO pension? Anything else I should know?

    Last edited by c1000; 12-11-2007 at 01:58 AM.

  2. #2

    Join Date
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    >> employer's contribution

    Assuming you mean the voluntary contribution.

    Depends on the vesting period negotiated with the employer.


  3. #3
    dreamlucca

    Thumbs up MPF v. ORSO

    Most people in HK are woefully ignorant of the benefits of both the MPF and ORSO. The HK government has done a poor job of educating the public as to their benefits and have failed to inflation adjust the MPF to allow for inflation. Both schemes are extremely valuable, in order to understand them properly, best to seek independent financial advice. Julian Galvin at Tyche Group is someone worth talking to.


  4. #4

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    Jun 2008
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    Absolutely concur with this last post.

    Both MPF and expsecially ORSO offer a number of key benefits which are not available with the individual products that most people in Hong Kong tend to use to supplement their retirement income.

    Both are extremely cost effective and ORSO especially as unlimited investment option capability. Poor communication is the reason why most Hong Kongers purchase inferior, expensive supplementary insurance products from IFA's to their financial detriment.


  5. #5
    dreamlucca

    Prudent Business Model & IFA's

    Agree with the last post regarding the purchase of inferior supplementary products, why do people do this?

    When it comes to addressing many areas of their own financial needs,the typical Hong Kong resident will not address such issues simply because they do not possess the required expertise, the time or indeed the inclination for a topic so vast and let’s face it, second to virtually all other chores in terms of excitement;sitting down to review your financial position comes a distant second to such activities as cleaning the car, sewing name tags into the kids uniform or framing that print you bought in Thailand.

    The Government has not done enough in terms of educating the people of Hong Kong regarding the benefits of the MPF and ORSO schemes, so finding someone who is able to review both independently and impartially for you is a problem in itself, in an industry largely consisting of tied company representatives and brokers holding very restrictive licenses (the majority do not hold investment licenses)

    Finding a reputable firm who are fully licensed and authorised can be like looking for the proverbial needle in a haystack. It is no wonder that so many fall so far short of gaining the maximum potential from Hong Kong’s unique and beneficial financial environment, which is well regulated, highly diversified and tax-free.

    Thanks to the ingrained attitude of laissé-faire; HK provides access to products and strategies other markets can only dream of, unfortunately for those who have ventured out, all too often the experience has only confirmed their worst fears. It is such a wasted opportunity when the fear of getting financial decisions wrong prevents you from taking any action and leaving you with the task of justifying why you saw ‘slightly wrong’ (procrastination) as being a good outcome.


    In brief an ORS established in Hong Kong is set up under a different set of criteria to those set up in other highly taxed jurisdictions where regulators determine what assets you may hold in a pension fund and also demand you report this to the Revenue because of their inherent 'tax benefits'

    Hong Kong takes the approach that a prudent business person can determine for themselves what is best to hold in their own pension plan. There are limitations on this, the investment cant be depreciable, highly illiquid or have an inherent liability on it - instead of the print from Thailand surely a Picasso or two would be deemed a good investment by any prudent business person?


  6. #6

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    i heard from a friend that HK will change the mechanics of how MPF works since most of the money is in the bank & while they are using our money we cannot get any until a certain age & with a volatile financial market nowadays we might be left with nothing which defeats the purpose of MPF, any news about this?


  7. #7

    Join Date
    Jun 2008
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    Quote Originally Posted by mengfei:
    i heard from a friend that HK will change the mechanics of how MPF works since most of the money is in the bank & while they are using our money we cannot get any until a certain age & with a volatile financial market nowadays we might be left with nothing which defeats the purpose of MPF, any news about this?
    To be honest quite the opposite is true. The fact is that whilst your other investments and cash deposits that you hold at the bank are possibly affected and may be in danger by this financial turmoil, your MPF & ORSO money is totally safe as it is held in trust in a segragated account that neither the insurance company, investment company the governement, the FED or anyone else apart from you can touch.

  8. #8

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    ....but for the MPF the employee places his money on some sort of an investment like Asia Equity Fund or Hang Seng Tracker Fund so when the whole market crashes those investments go along with it.

    Even with Guaranteed Fund or Balance fund you still loose out


  9. #9

    Join Date
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    Benefits of MPF or ORSO?

    Quote Originally Posted by dreamlucca:
    Most people in HK are woefully ignorant of the benefits of both the MPF and ORSO. The HK government has done a poor job of educating the public as to their benefits and have failed to inflation adjust the MPF to allow for inflation. Both schemes are extremely valuable, in order to understand them properly, best to seek independent financial advice. Julian Galvin at Tyche Group is someone worth talking to.
    Thank you for your comment. Please could you at least give some hint of the benefits of these schemes? I currently have a choice between staying on a "short-term assignment" contract with a UK-based pension, or localizing and being required to choose either MPF or ORSO. The only differences I can see are that MPF contribution from my employer is capped at $1,000 per month (soon to be $1,250), as are the tax deductions, that ORSO will give you more per month from your employer (5% of your Salary, including housing benefits, but excluding any other benefits, which rises over time, at least in our scheme), but leaves you unvested for two years, and only parially vested until your tenth year, and delivers the same paltry tax deduction as the MPF, does not count any years already spent with the company in other offices. Unvested means that if you leave the company, you cannot take all the money with you, which is shocking in my case since I have actually been with the company for more than ten years already. The funds that you can invest in are limited, and are almost exclusively those "make bankers rich" schemes that take a fixed percentage of your capital to pay some "fund manager". [<rant>Why should I take all the risks when I am following their advice? Shouldn't they be paid according to my gains / losses in the year? As we all know, the performance of investments is more random than anything else.</rant>] I believe that there is some protection for the funds in the MPF (a compensation fund in case the company handling your fund defaults), but not in the ORSO, as far as I can see. Of course, if the funds you have invested in lose their value, there is no recourse to compensation - caveat emptor!

    Based on what I have discovered, it is less than clear that the MPF and ORSO schemes deliver significant benefits, so consulting with your friend may not be that helpful. Any comments on this would be very welcome.
    Last edited by muchado; 28-02-2012 at 09:01 AM.

  10. #10

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    Quote Originally Posted by dreamlucca:
    Most people in HK are woefully ignorant of the benefits of both the MPF and ORSO.
    Really? For ORSO, perhaps, but for MPF most HK people seem well aware of both the 'benefits' of the scheme and also the significant problems with it.

    Perhaps you would like to enlighten us as to what we have been missing?
    Last edited by dipper; 28-02-2012 at 09:44 AM.