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Pension advice

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  1. #11

    Join Date
    May 2009
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    1,289

    The 10% per year is not an offset.
    When you leave HK (and in principal not to return) you are allowed to take your MPF out but you only get 100% after working for 10 years at the company (this includes the years working for the same company in your previous country)
    For each each year you get 10% so let’s say you leave after 3 years then you can only get 30%. After 10 years 100%.


  2. #12
    Quote Originally Posted by Sith:
    The 10% per year is not an offset.
    When you leave HK (and in principal not to return) you are allowed to take your MPF out but you only get 100% after working for 10 years at the company (this includes the years working for the same company in your previous country)
    For each each year you get 10% so let’s say you leave after 3 years then you can only get 30%. After 10 years 100%.
    Not just only when you leave HK though. If you move from a company with an ORSO to another company with an MPF or different ORSO you can also cash out your plan (after transferring a mandatory amount to a new MPF plan). The balance will be vested in the same way.

    And if employer contributions above and beyond minimum MPF amounts are not vested, then likely to be taxable.
    Sith likes this.

  3. #13

    Join Date
    Feb 2006
    Posts
    829
    Quote Originally Posted by Edwardstorm:
    .... I have no clause in contract allowing employer to claw back (didn’t even know this was an option as the MPF fund is under my control. Are you sure this 10% was on MPF contributions?)
    I don't think they need a clause. Your severance pay can be offset against employer contributions made to your MPF. The clawback is embedded in the design of the MPF (hence the fuss that's been going on for years to get this reversed and employer protests right now).

    Admittedly it would be nice to have that more clearly stated in contracts, esp for expats. Some firms don't use that offset when letting people go, but that's entirely at their discretion, and they certainly have the right to do so. I go with the hope that mine won't but know that they may well do so.

  4. #14
    Quote Originally Posted by z754103:
    I don't think they need a clause. Your severance pay can be offset against employer contributions made to your MPF. The clawback is embedded in the design of the MPF (hence the fuss that's been going on for years to get this reversed and employer protests right now).
    I am aware of the severance pay clawback but my assumption always was that this only applies if the employer terminates your services. I thought that if you decide to seek employment with another company the company (you give notice to) can’t clawback their MPF contributions (mandatory or voluntary) and hence the value should remain in the MPF? Likewise if you retire at 65 (or early retirement at ages 60 to 65) there is no mechanism to clawback or levy taxes on the voluntary contributions? Or are my assumptions wrong?

  5. #15
    Quote Originally Posted by Edwardstorm:
    I am aware of the severance pay clawback but my assumption always was that this only applies if the employer terminates your services. I thought that if you decide to seek employment with another company the company (you give notice to) can’t clawback their MPF contributions (mandatory or voluntary) and hence the value should remain in the MPF? Likewise if you retire at 65 (or early retirement at ages 60 to 65) there is no mechanism to clawback or levy taxes on the voluntary contributions? Or are my assumptions wrong?
    Lets use an example.

    Salary 100,000 HKD and you have a standard MPF plan. You and employer both contribute 5% of salary which is capped at 1.5k HKD per month. You leave to get a new job, this entire 3k is yours and cannot be touched (because this is amount is mandatory by MPF law)

    Salary 100,000 HKD and you have an ORSO (or other plan). Your employer contributes, for example, 5% plus half of what you contribute (typical terms for a ORSO). You contribute 5% so employer ends up contributing 7.5%.

    The 5k you contribute is all yours obviously. Your employer contributes 7.5% of 100k = 7.5k. Then, 1.5k of this is all yours regardless (an amount equivalent to example 1 above). The rest may or not be vested according to your ORSO terms. If it is vested at 10% per year of service, you will have no income tax liability on it. (10% per year is commonly chosen by firms to neutralise the tax liability I believe) If not vested at that rate, then it would count as taxable income.

    I am not sure of exactly of the retirement bit, as I am nowhere near 65 and will probably just cash the whole thing out early at some point.

  6. #16

    Join Date
    Oct 2006
    Location
    Hong Kong
    Posts
    15,557

    My old employer had its portion vested on a sliding scale until you had been there for 5 years at which point it was fully vested with you.

    I can't believe that vesting and offsetting exist on pension schemes. But hey, this is Hong Kong and not the "West" so I should just make my way to the airport.