Expats warned on spread of MPF net
EXPATRIATE workers in Hong Kong who assume the Mandatory Provident Fund will not apply to them should think again.
Under the MPF Ordinance, the basic requirement to join an MPF scheme applied to all employees and did not differentiate between expatriate and Hong Kong workers, said Peter Crewe, sales and marketing director of AIA Pension and Trustee Co.
The only exceptions were expats working in Hong Kong for less than 12 months or those who were covered by a home-country retirement scheme. Some expat employees also might fall into exempt categories, which included civil servants, domestic workers and hawkers.
'The majority of expats normally are transferred here and they normally stay in their home-country scheme,' he said. 'But that may not be the case if they are hired on a local contract, such as some teachers and other professionals.' Workers hired under local contract terms might, of course, have chosen to remain in a home-country scheme and would therefore be exempt from MPF.
For workers who remained in an offshore scheme but deferred payments during their time in Hong Kong, the requirements were less clear, Mr Crewe said.
MPF guidelines make it uncertain whether active and contributing members alone are exempt, or whether expats who have deferred contributions to an overseas scheme also can opt out.
The MPF Authority would have to clarify this point, he said.
Offshore retirement schemes are likely to offer more flexibility than the MPF and expat workers not covered should study the options available.
Under MPF, benefits cannot be withdrawn until the age of 65, or until permanent departure from Hong Kong. If an expat worker leaves Hong Kong, benefits can be withdrawn. But if a worker later returns and recommences membership of an MPF scheme, and then departs once again, he will not be permitted to withdraw benefits a second time until he reaches 65.
Most offshore or home-country retirement schemes are more likely to allow benefits to be withdrawn at any time an employee chooses to retire or withdraw from the scheme.
Off-shore schemes also may offer tax advantages, depending on residency when in receipt of benefits.
Employers often see attractive retirement scheme benefits such as flexible retirement ages and generous 'top-up' payments as an aid to retaining senior personnel. They also may find MPF schemes do not offer the same freedom to reward senior staff.
'Obviously MPF only applies to salaries up to $20,000, so a lot of companies that base their pension schemes on gross earnings are going to be looking to have some sort of top-up scheme,' said Mr Crewe. 'A lot of these bigger multinational companies will already have established schemes and the likelihood is they will want to retain them.' Under MPF, employees will be required to contribute 5 per cent of net monthly earnings between $4,000 and $20,000. Employers also will contribute 5 per cent. Contributions on monthly income above $20,000 will be voluntary.
Self-employed people will be required to contribute 5 per cent of income derived in Hong Kong.
The latest industry estimates on when the much-delayed scheme will be operating is the last quarter of 2000.
Mark Russell
