Mandatory contributions made for an employee are fully and immediately vested in the employee once they are paid into his/her MPF account. Any investment return derived from the mandatory contributions is also fully and immediately vested in that employee.
How to calculate contributions
SEPs under the MPF System are required to make mandatory contributions equal to 5% of their relevant income to an MPF scheme at a regular interval. Contributions are subject to the minimum and maximum relevant income levels.
Relevant income levels for contributions
The current minimum and maximum relevant income levels are $7,100 per month (or $85,200 per year) and $30,000 per month (or $360,000 per year) respectively.
- taking the assessable profits stated in their most recent notice of assessment issued by the Inland Revenue Department as their relevant income;
- taking the basic allowance as defined under section 28 of the Inland Revenue Ordinance as their relevant income;
- making an income declaration to their trustees; or
- taking the maximum relevant income level per year as their relevant income.
If sustaining a loss in business
SEPs can opt to make mandatory contributions on a monthly or yearly basis.
SEPs should notify their trustees in writing, and specify their monthly contribution day on their enrolment forms.
If an SEP specifies the last day of each month as the contribution day, the contribution period will be from the first day to the last day of a month. If the SEP chooses the 20th as the contribution day, the contribution period will be from the 21st of each month to the 20th of the following month.
The contribution day is the last day of a financial year of an MPF scheme. SEPs should make their contributions on or before the last day of the financial year of the scheme.
As the financial year of individual MPF schemes may vary, SEPs should inform their trustees of their preferred frequency for making contributions when they enrol in the scheme.
If the contribution day falls on a Saturday, a public holiday or a gale/black rainstorm warning day, the contribution day will be extended to the next day which is not a Saturday, a public holiday or a gale/black rainstorm warning day.
Annual benefit Statement
The statement must include: total amount of contributions paid by the SEP, the opening and closing balance of the account, and gains and losses associated with the MPF account for the year.