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Legislation & Regulations



23 October 2001

To : All Approved Trustees of Registered Schemes

Dear Sirs,

Self-employed Persons ("SEPs")

Certain practical issues on the operation of SEP accounts have been identified since the commencement of the MPF system, and the Authority would like to share with approved trustees its views on them.

Change of Relevant Income of SEPs

Many approved trustees have received requests from their SEP clients, particularly those whose relevant income is taken to be the statutory maximum because evidence had not been produced to the approved trustees before the scheme financial period, to change their relevant income declarations due to various reasons. Some of these SEPs also demand the change to be made effective retrospectively, and the "overpaid" mandatory contributions be refunded.

The current MPF legislation does not prohibit an SEP from changing his relevant income declaration in the middle of a financial period of the scheme. The Authority is of the view that an SEP may revise his relevant income if he produces the necessary evidence or declaration to his scheme trustee. However, the change does not have any retrospective effect and any contribution paid to the scheme trustee before the change cannot be refunded to the SEP because these contributions have had been made in accordance with the law, and are therefore mandatory in nature and subject to the preservation provision in the MPF legislation.

Nomination of a non-calendar month as the contribution period

The current MPF legislation allows an SEP to specify a particular day in a month to be the beginning of a contribution period, if the SEP chooses to contribute on a monthly basis.

This level of flexibility complicates the calculation of contributions if the contribution period nominated does not coincide with the scheme year-end. Prorating of the contribution amounts may become necessary. Furthermore, the calculation will also be problematic if the specified day is changed in the middle of a scheme year, creating contribution periods of longer and shorter than one month.

The intent of the monthly contribution arrangement is to allow an SEP to settle his annual contribution obligation by 12 equal monthly instalments. As such, the Authority does not have any objection to approved trustees treating the monthly contribution period as a complete calendar month for the purpose of calculating mandatory contributions. However, the date specified by the SEP should still be adopted for payment and compliance monitoring purposes.

Obtaining new relevant income declarations

The current MPF legislation provides that an approved trustee should take all reasonable steps to ascertain the new relevant income of its SEP clients for the next scheme year before the end of the current scheme year.

It is envisaged that despite the best effort of the Authority and approved trustees, many SEPs would still fail to provide new evidence or declarations on time. This will undoubtedly cause much confusion and unnecessary dissatisfaction for SEPs, and will be in nobody's interest.

The Authority believes approved trustees should remind their SEP clients to submit new evidence or declarations on their relevant income. Before doing so, approved trustees should try their best effort to ensure that the correspondence address of their SEP clients are up-to-date, possibly by referring to the business registration information available. Provided it is clearly spelt out in the reminder, non-reply can be deemed as the SEP's acknowledgement that his relevant income has not changed from last scheme year to the current one.

Should you have any question about the content of this circular letter, please feel free to contact your case officer.

Yours faithfully,

(Ms Hendena YU)
Chief Operating Officer (Compliance)

Last Revision Date: 17/10/2014