Question on MPF vs. Company Pension Fund

[newsense]

While I'm painstakingly reading through the huge amount of paperwork my company have given me relating to the company pension plan vs. MPF, I'm hoping someone can give me a quick answer to this question to aid my decision/boredom!

I plan on living and working in HK for the foreseeable future, perhaps for good, but given that I am in my 20's and have only recently arrived, it's difficult to know what the future holds at the moment. My question is, if I were to leave HK in the future and return to the UK, would a company pension plan or the MPF (or both) return ONLY my own contributions to me on departure, or would I also receive back the contributions the company had made? I'm trying to decide which plan to take and whether to pay any additional contributions, which only really seems worth it if I wlll receive back the company contributions as well.

Any thoughts?

Thanks!

[DarrenChan]

For the MPF, you will be able withdraw the statutory (vs voluntary) contributions from both the employer and employee accounts. If your employer makes voluntary contributions, they would usually have some mechanism to limit the amount you can withdraw depending on your years of service (e.g. 0% in first 3 years, 40% in the fourth etc).

[chris_in_hk]

What DarrenChan says is correct.

Company pension plans usually have a vesting schedule saying how much of their contributions you can get after X number of years' service.

With MPF, assuming you earn 20k or more a month, your employer will have to (i.e. statutory) contribute 1k/mth into it and you will have to contribute 1k/mth into it too. When you leave HK for good you can cash this out.

Any voluntary contributions by the company into your MPF may be subject to a vesting schedule.

Generally it's a bad idea to pay any additional voluntary contributions yourself into your MPF as they're not the best vehicle for investing for your future (your money gets locked usually until you're age 65, or you leave the country for good or there could be withdrawal charges. There are other circumstances but I won't list them all), your fund choice is limited and costs can be higher than investing elsewhere. Basically don't do it. Plenty of other ways to invest your money better and with more flexibility.

To decide whether to go for the company pension plan or MPF you need to figure out how long you're likely to stay with the company and how much extra they're contributing into your pension plan as opposed to your MPF.

You always get a 'statutory' part of the employer contribution whether if it's in your MPF or company pension plan. It's how much on top of that you can get and when.

Hope that helps

[newsense]

Hi Chris,

Thanks for the advice. That is along the lines I was thinking, if I am unsure about my long term plans then probably best not to put in any voluntary contributions. That said, if I was planning to remain in the country until retirement, I would most likely choose the company pension and invest the maximum amount possible, purely because the company match any voluntary contributions like for like - effectively a 100% return off the cuff.

However, as it stands I don't know where I'll be in a few years, so based on that information I think it's best to just contribute the minimum for the time being.

Thanks again for the info

[chris_in_hk]

Hi Newsense,

You're welcome.

When I was talking about voluntary contribution I was only talking about MPF.

Sounds like your company pension plan is much better than the MPF, which is rather basic.

For the company pension I'm sure their matching contribution is capped. Check how often or when you can change your voluntary contribution amounts to get their matching as if it's half yearly then you get another chance to decide/change your decision 6 months down the line. If it's yearly then that's a bigger decision you need to figure out.

Next I'd check to see how much you can reasonably put into it as, like you say, that's a 100% return you're missing out on.

Also, depends on how generous the vesting schedule is, as if it's not that generous then you have to stick around a bit longer before it pays off for you. But when they're matching 100% you can come out ahead fairly fast.