career

Fresh graduates have gradually entered the workforce and are beginning to contribute 5% of their monthly salary to their Mandatory Provident Fund (MPF) accounts. Many people believe that MPF can only be withdrawn after retirement and, as a result, may not pay much attention to it.



However, the truth is that managing your MPF account properly and early on can lead to significant wealth accumulation through the power of compound interest. Therefore, fresh graduates should take their MPF accounts seriously from their first job onwards.



<h2 class="wp-block-heading">Is MPF Mandatory in Hong Kong?</h2>



According to the law, all employees between 18 and 64 years of age who have been employed for at least 60 days, whether full-time or part-time, must participate in an MPF scheme. The minimum contribution amount is 5% each from the employer and employee, with respective caps of HK$1,500. If an employee&#8217;s monthly income is less than HK$7,100, the employee is not required to make contributions. However, the employer still has to contribute 5% of the employee&#8217;s monthly salary.



Employees are entitled to a contribution holiday during the first 30 days of employment and the first incomplete salary cycle. In other words, many workers do not need to contribute to the MPF for the first two paychecks, but the employer will still contribute on their behalf.



According to statistics released by the MPFA in March 2022, 77% of the employed population in Hong Kong is covered by the MPF scheme.



<h2 class="wp-block-heading">Why is MPF Important?</h2>



<figure class="wp-block-image is-resized"><img decoding="async" src="https://images.unsplash.com/photo-1508963493744-76fce69379c0?ixlib=rb-0.3.5&amp;ixid=eyJhcHBfaWQiOjEyMDd9&amp;s=6208a3203071968105278c7d0c15587b&amp;w=1000&amp;q=80" alt="man and woman sitting on bench facing sea" width="500" height="334"/><figcaption class="wp-element-caption">▲MPF is a long-term investment that affects retirement life and should be managed with caution.</figcaption></figure>



MPF is a long-term investment closely related to retirement life and should be managed carefully. Since the implementation of the MPF system, the average rate of return of the funds after deducting expenses is 4.4%.



Assuming that you start working at the age of 23 with a starting salary of HK$15,000 and an average annual salary increase of 3.8% (based on the average of the past 10 years according to the Census and Statistics Department), according to the MPF accumulative benefits calculator provided by the MPFA, you can obtain the following benefits from the MPF upon retirement:



If the annual rate of return of the MPF remains at 4.4%, you can receive a total of HK$4.09 million (principal and interest) upon retirement at the age of 65. If your MPF outperforms the market and the rate of return reaches 8%, you can receive nearly HK$9.82 million upon retirement. However, if your MPF underperforms and the rate of return is only 2%, you can only receive about HK$2.5 million upon retirement.



Based on the average inflation rate of 3.2% over the past 10 years, HK$9.82 million, HK$4.09 million, and HK$2.5 million are only worth about HK$2.56 million, HK$1.06 million, and HK$660,000 today, which may not be sufficient to meet your retirement needs. You may still need savings and investments outside of MPF.



Nevertheless, it is clear that managing MPF properly can significantly enhance retirement funds. Young people have a high chance of receiving accumulative MPF benefits of millions of dollars after retirement. On the other hand, neglecting MPF will only make the already insufficient returns for retirement even more challenging.



<h2 class="wp-block-heading">What are the 5 types of MPF and their Risk Levels? </h2>



MPF can be divided into the following 5 categories, ranked from high to low risk:



<ol>
<li>Equity funds: Equity funds have higher risks and potential returns. They invest in single regions, areas, or global stock markets, such as Hong Kong equity funds, Asia equity funds, and international equity funds. The fund&#8217;s performance in stock markets and currency exchange rates influence stock market fluctuations.</li>



<li>Mixed-asset funds: Mixed-asset funds have medium-to-high risks and primarily invest in stocks and bonds to diversify risks—generally, the higher the proportion of stocks, the higher the risk.</li>



<li>Bond funds: Bond funds have medium-to-low risks and invest in bonds or debt instruments issued by governments, banks, commercial institutions, or international organizations such as the World Bank. Returns mainly come from bond interest income or profits from buying and selling bonds on the market. Bond prices may fall during interest rate hikes, and factors like exchange rate fluctuations and credit ratings can affect returns.</li>



<li>Guaranteed funds: Guaranteed funds have relatively low risks and offer guarantees such as the minimum return on capital for plan members. However, most have conditions such as failure to meet the required number of contributions, withdrawals, or plan conversion within a specified period that could render the guarantee void.</li>



<li>Conservative funds: Conservative funds have relatively low risks and mainly invest in Hong Kong dollar assets such as short-term bank deposits and bonds. The goal is to earn returns equivalent to Hong Kong dollar savings deposit interest rates. Although the risk is low, it may fall behind inflation.</li>
</ol>



<h2 class="wp-block-heading">MPF Tax Deductible Voluntary Contributions</h2>



Apart from the mandatory contribution of 5% of their salary, employees can also make voluntary contributions to enhance their savings. These contributions can be divided into three categories: employee voluntary contributions, special voluntary contributions, and tax-deductible voluntary contributions. 



Since the MPF is a long-term investment, even if an employee contributes an additional 1% of their salary each month, the effect of compounding interest can significantly increase their assets over time.



Use the Mandatory Provident Fund Calculator now to see how voluntary contributions can impact your retirement savings:



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<h2 class="wp-block-heading">How to Allocate Your MPF Investment Portfolio?</h2>



MPF is a long-term investment that can last for decades. Young professionals with the time to withstand market fluctuations often choose equity or mixed-asset funds with higher returns. However, high returns also mean high risks, and employees should carefully consider their risk tolerance. Diversifying investments can reduce risk.



If no specific instructions are given, the fund will be managed according to the &#8220;Default Investment Strategy&#8221; (DIS), commonly known as the &#8220;lazy fund.&#8221;



To gain a deeper understanding of a fund&#8217;s background, investment performance, fees, and other details, you should read the Fund Fact Sheet or the MPF fund platform provided by the Mandatory Provident Fund Schemes Authority.



<h3 class="wp-block-heading">Fund Fact Sheet</h3>



Many people do not read the Fund Fact Sheet carefully when they receive it. However, the Fund Fact Sheet can help you understand important information about the fund when selecting MPF investment portfolios, including:



<ul>
<li>Investment policy and objectives:&nbsp;Explains whether the fund aims to maintain capital or increase assets, allowing you to know whether the fund&#8217;s investment strategy meets your expectations.</li>



<li>Fund size/asset value:&nbsp;Lists the fund&#8217;s total assets minus its liabilities.</li>



<li>Fund type description:&nbsp;Briefly introduces the investment region of the fund and whether it belongs to the category of stocks, bonds, or mixed assets.</li>



<li>Investment portfolio distribution:&nbsp;Uses charts to show the proportion of the fund&#8217;s investment in different categories of investment tools (such as stocks and bonds) and regions (such as Japan, Europe, and Hong Kong).</li>



<li>Top 10 assets:&nbsp;List the top 10 securities that comprise the highest percentage of the fund&#8217;s net asset value, reflecting how the fund is deployed and its investment strategy.</li>



<li>Risk indicator (or risk label):&nbsp;Reflects the potential risk and return of the fund by measuring the fund&#8217;s volatility over the past three years. Generally, the higher the value, the higher the potential risk and return.</li>



<li>Fund expense ratio:&nbsp;The fund&#8217;s total expenses as a percentage of its assets will affect investor returns.</li>



<li>Fund performance:&nbsp;Shows the return rate of the fund in 1 year, 5 years, 10 years, and since its launch.</li>



<li>Commentary:&nbsp;Analyzes and evaluates the fund&#8217;s performance and market trends, explains the factors considered when deploying the fund, and helps you understand the market and make investment decisions.</li>
</ul>



<h2 class="wp-block-heading">MPF Fund Platform</h2>



The MPF Authority has established an <a href="https://mfp.mpfa.org.hk/eng/mpp_index.jsp">MPF Fund Platform</a>, allowing employees to quickly access basic information and the performance history of various funds. You can filter plans and fund categories and view important data such as the fund&#8217;s return rates over the past 1, 5, and 10 years and the current management fees and fund expense ratios.



As MPF is a long-term investment, short-term performance should not be the sole focus. If your goal is capital preservation, pay more attention to the 5-year and 10-year return rates to assess the fund&#8217;s stability.



<ul>
<li>Fund Fees: When selecting an MPF scheme, besides focusing on the rate of return, it is essential to pay attention to the fund fees. Otherwise, choosing a fund with high fees may significantly reduce the actual returns earned. Through the MPF fund platform provided by the MPFA (Mandatory Provident Fund Schemes Authority), you can clearly compare the fees of different funds.</li>



<li>Fund Size: Large fund size does not necessarily mean better performance. In many cases, smaller funds can outperform the market. This is because large market investors often buy or sell stocks in large quantities, and the same amount of investment returns a higher percentage for smaller funds, making it easier for them to outperform the market. Of course, these types of funds may also have higher volatility.</li>
</ul>



<h2 class="wp-block-heading">How to Manage your MPF in a Bear Market?</h2>



Due to political and economic factors, stock markets in China, the US, and Hong Kong have been highly volatile in recent years. So how should you manage your MPF investment portfolio during a bear market? There are two main strategies:



<h3 class="wp-block-heading">Stable Approach – Focus on hedging:</h3>



Switching from high-risk and high-return funds to a stable but lower-return combination to reduce losses during market downturns.



<h3 class="wp-block-heading">Aggressive Approach – Buy low:</h3>



Despite the market downturn, you can buy more fund units with the same monthly contributions, so some people expect to buy stocks with high risk and high returns at a lower price and earn more profits when the market rebounds.



<h3 class="wp-block-heading">Regular Review of MPF Portfolio</h3>



Employees should pay attention to and regularly review the performance and accumulated assets of their MPF funds. They should consider their risk tolerance to decide whether to change their investment portfolio and be prepared for any potential risks in advance. Be sure to seek a solution before there are significant market changes. Otherwise, if you find that your MPF performance is not as expected just before your retirement, you will regret not taking action earlier.



<h2 class="wp-block-heading">What is the &#8220;Employee Choice Arrangement&#8221;?</h2>



In 2012, the Mandatory Provident Fund Schemes Authority (MPFA) introduced the &#8220;Employee Choice Arrangement&#8221; (ECA), which is commonly known as the &#8220;Semi-Self-Selected&#8221; （強積金半自由行） scheme.



Under this scheme, employees can transfer the accrued benefits of the mandatory contribution portion of their MPF accounts to a self-selected MPF scheme once a year. However, employees cannot move the employer&#8217;s contribution portion. The new contributions made by employees will continue to be deposited into the original scheme until the following year&#8217;s transfer opportunity.



<h2 class="wp-block-heading">How to Handle MPF when Starting a New Job?</h2>



For new graduates, job hopping may be more frequent, and it&#8217;s important not to forget to handle the old company&#8217;s MPF account. If there are no instructions after changing jobs, the accumulated benefits of the old company&#8217;s MPF plan will be transferred to the personal account and continue to be invested.&nbsp;



After changing jobs several times, you may have multiple MPF personal accounts. Employees can choose to manage multiple MPF accounts simultaneously or consolidate their MPF accounts.



<h3 class="wp-block-heading">Managing Multiple MPF Accounts:</h3>



From an investment perspective, holding only one MPF account may not be ideal for achieving risk diversification. Distributing contributions to plans with different trustees helps balance risk. The easiest way is to link all MPF accounts to the same MPF app, greatly saving management time.



<h3 class="wp-block-heading">Consolidating MPF Accounts:</h3>



When consolidating MPF accounts, you can choose to:



Transfer old contributions to the new company&#8217;s MPF account;



After each job change, transfer the accumulated MPF benefits from the old company to the same personal account to easily manage fund performance and investment strategy.



To consolidate MPF accounts, first, fill out the consolidation form and submit it to your trustee. If you forget how many MPF accounts you have, fill out and submit an inquiry Form to the MPFA or check your MPF accounts on the MPFA&#8217;s electronic platform. The easiest way to consolidate MPF accounts is to contact the trustee and let their specialists assist you.



<h2 class="wp-block-heading">Try Planto for Free &#8211; Intelligent Finance App for MPF Management and More</h2>



Download the Planto app now and enjoy a 3-month free trial. After that, the app costs HK$38 per month or HK$388 per year. Planto users can enjoy the convenience of minimalist finance management and receive exclusive offers and financial education content.



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<h3 class="wp-block-heading">Recommended Readings</h3>



<ul>
<li><a href="https://www.planto.hk/en/blog/insurance-intro/">Insurance Hong Kong 101: Life, Medical, Accident &amp; Critical Illness</a></li>



<li><a href="https://www.planto.hk/en/blog/personal-loan-APR-comparison/">Personal Loan Hong Kong: Borrow with the Best Interest Rate</a></li>



<li><a href="https://www.planto.hk/en/blog/tu-credit-report-explained/">TransUnion Credit Score: How to Improve + Everything Hong Kongers Should Know</a></li>
</ul>

Managing your MPF account properly and early on can lead to significant wealth accumulation through the power of compound interest. Learn more now!

Mastering MPF Hong Kong: Ultimate Guide to Mandatory Provident Fund Scheme

Tax is one of the things everyone hates &#8211; but there are ways to reduce it! One option is to make use of <a href="https://www.fidelity.com.hk/en/mpf-tvc/tax-deductible-voluntary-contributions">Tax Deductible Voluntary Contribution</a> (TVC). In this article, we will show you the benefits of TVC, steps to open a TVC account and how to apply for tax deductions.



<h2 class="wp-block-heading">TVC applications are rapidly increasing </h2>



<a href="https://www.fidelity.com.hk/en/articles/press-releases/2019-12-04-global-wi-tax-incentives-1575442758915">According to Fidelity International</a>, more than 80% of Hong Kong people were positive about the government’s new tax-deductible financial products e.g. TVC and QDAP and VHIS. Based on MPFA’s research, as of September 2019, there were 19,000 TVC accounts held by Hong Kong employees, which was a five-fold increase from April 2019 (3,400 TVC accounts)!



<figure class="wp-block-table"><table class=""><tbody><tr><td>Date</td><td>Contribution Accounts</td><td>Personal Accounts</td><td>TVC Accounts</td></tr><tr><td>30/6/2019</td><td>4,183,000</td><td>5,723,000</td><td>13,000</td></tr><tr><td>30/9/2019</td><td>4,228,000</td><td>5,771,000</td><td>19,000</td></tr><tr><td>Growth Rate</td><td>+1.07%</td><td>+0.83%</td><td>+46.15%</td></tr></tbody></table></figure>



Although TVC has been growing since its launch, it still accounts for less than 0.2% of the total MPF accounts.



<h2 class="wp-block-heading">Benefits of TVC</h2>



<h4 class="wp-block-heading">Pay less tax</h4>



TVC contributions can be included in tax deductions under salaries tax or tax under personal assessment, with a maximum cap per year of $60,000 (which is an aggregate limit for TVC and qualifying deferred annuity policies premiums). It can save you up to HK$10,200 in tax each year. <a href="https://fidelity.onelink.me/b9Fq?pid=planto&amp;c=2020_etvc&amp;af_channel=display&amp;af_adset=tvc_howto">Click here to know more about TVC tax deductions</a>!



<h4 class="wp-block-heading">Increase your net worth</h4>



Under the fierce inflation in Hong Kong, relying on MPF contributions alone may not be enough to support retirement life. If you put away just a few hundred dollars each month for voluntary contributions, your net worth at retirement can be increased by millions.



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<h2 class="wp-block-heading">How to open a TVC account</h2>



Opening a TVC account is simple. You just need to request a TVC application form from your MPF provider, complete the form and return it with copies of HKID card and residential address proof. 



Steps to apply for a TVC account using physical form



Application form can be downloaded from MPF trustee’s website. You can then apply for an account 
following these 3 steps:



<ol><li>Complete your personal and employment information such as name, date of birth, contact details etc. Since TVC accounts are not opened with employers, additional information such as income and job position will be required</li><li>Choose a contribution model, whether this is lump sum or regular monthly contribution. Lump sum payment method requires a cheque while regular monthly contribution requires a Direct Debit Authorization form</li><li>Choose your funds and investment allocation. If there is no instruction or the instruction is not clear, the contributions will be invested according to the Default Investment Strategy (DIS)</li></ol>



Steps to apply for a TVC account online in 15 minutes



Some MPF trustees have launched mobile application to facilitate online TVC account opening. For example, Fidelity’s <a href="https://fidelity.onelink.me/b9Fq?pid=planto&amp;c=2020_etvc&amp;af_channel=display&amp;af_adset=tvc_howto">SmartRetire app</a> allows you to open a TVC account completely online, from the comfort of your home. The account can be opened following 3 simple steps:



<ol><li><a href="https://fidelity.onelink.me/b9Fq?pid=planto&amp;c=2020_etvc&amp;af_channel=display&amp;af_adset=tvc_howto">Download the SmartRetire app</a> and choose an open to apply for a TVC account</li><li>Verify your identity through the app, fill in electronic form and choose investment allocation</li><li>Confirm payment method, arrange for payment then complete your application using electronic signature</li></ol>



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How to transfer TVC assets



You can only transfer balance from one TVC account to another. So if you have multiple TVC accounts (one for each MPF scheme), you may want to consolidate it all. Once you do that, your TVC account in the original scheme will be terminated. Transfer forms are downloadable from websites of MPFA or from your current MPF provider.



How to apply for TVC tax deductions



To apply for TVC tax deductions, you simply need to claim the deductions in the Tax Return (BIR60)<s>.</s> If you have already submitted the 2019/20 tax return, you may apply for correction within 6 years after the end of the relevant year of assessment.



You won’t need to attach any supporting documents to the tax returns but you should retain the contribution summaries by the trustees for 6 years, in case of a selected review by the HK IRD.



In addition, if a TVC member also has <a href="https://www.gov.hk/en/residents/taxes/salaries/allowances/deductions/annuity.htm">qualifying annuity premiums</a>, the TVC deductions would be claimed first. Lastly, you only claim tax deductions from your personal account, not family members’ account.



“In this world nothing can be said to be certain, except death and taxes,” said Benjamin Franklin. Taxes may be certain but we can be smart about it &#8211; pay less tax but use it to increase your net worth and strengthen your financial foundation after retirement.



&#8212;



Important information



Investment involves risks. This material contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. The information contained in this material is only accurate on the date such information is published on this material. Opinions or forecasts contained herein are subject to change without prior notice. Reference to specific securities mentioned within this material (if any) is for illustrative purpose only and should not be construed as a recommendation to the investor to buy or sell the same. Any person considering an investment should seek independent advice. FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited. This material is issued by FIL Investment Management (Hong Kong) Limited and Planto, and has not been reviewed by the Securities and Futures Commission.



This information is intended to be educational and is not tailored to the investment needs of any specific investor. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment or action.



The results of the projection of MPF accrued benefits is calculated based on certain assumptions and it is for reference only. 



Investment involves risks. Past performance is no guarantee of future results. The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The third party mark appearing in this material is the property of the respective owner and not by Fidelity.



This material may contain materials from third parties which are supplied by companies that are not affiliated with any Fidelity entity (“Third Party Content”). Fidelity has not been involved in the preparation, adoption or editing of such third party materials and does not explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed on third party materials are solely those of the independent providers, not of Fidelity. Third Party Content is provided for informational purposes only.

Want to pay less tax and increase your net worth? Make use of Tax Deductible Voluntary Contribution (TVC)! In this article, we will show you the steps to open a TVC account and how to apply for tax deductions.

[Save on your tax] How to open a Tax Deductible Voluntary Contribution (TVC) account

Both TDF and DIS are MPF products that automatically adjust their asset distribution as time goes by. Regardless of which one you opt for, its strategy will put a heavy focus on higher risk investments in the early stages, and shift to holding relatively safe bonds and cash in the late game. But this is where the similarities end.
TDF is a mixed assets fund with a portfolio composed mainly of stocks, bonds and cash. Let’s look at Fidelity’s SaveEasy 2040 Fund (the number suggests the year of retirement). As the target date draws closer, the investment portfolio will adjust itself &#8211; less stocks and other adventurous ventures, more bonds and cash holdings.
DIS is the default MPF option in any MPF schemes as ruled by the Mandatory Provident Fund Schemes Authority (MPFA). One can see it as the vanilla choice, made up of the Core Accumulation Fund (CAF) and the Age 65 Plus Fund (A65F). You will have invested in CAF before the age of 50; after which the holdings will automatically shift towards A65F until age 64.
While TDFs and DISs from different MPF trustees have their own unique perks, here is a general comparison between the two products: 

<dis-tdf-table language='en'></dis-tdf-table>


If you ever feel too overwhelmed at work, or don’t feel like spending the effort to learn and manage yet another financial product, these two automated MPF plans are for you! Once committed, the entire investment process will be executed and finished by your trustee, so you are set on your career-long MPF investment plan without lifting a finger. TDF and DIS are not called the “funds for slackers” in town for nothing.
<h4 id="performance-and-fees">Performance and fees</h4>
Your highest concern is rightfully on the fares and how well your MPF fares. Fret not, for we at Planto have aggregated the vast swathes of market data below, so you can compare TDF and DIS performances according to your age and target retirement year.
<h2 id="funds-comparison-target-date-funds-tdf">Funds Comparison: Target Date Funds (TDF)</h2>

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<h2 id="funds-comparison-default-investment-strategy-dis">Funds Comparison: Default Investment Strategy (DIS)</h2>

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<h2 id="3-moves-to-reorganise-your-mpf">3 moves to reorganise your MPF</h2>
If you are looking into restructuring your MPF portfolio and partitioning it to TDF, DIS or other MPF funds, here are three ways to do it:
<ol>
<li>Instruct your MPF trustee (or your agent) to adjust your investment portfolio</li>
<li>Combine your MPF accounts and entrust it to one trustee for investment management</li>
<li>Open a tax deductible voluntary contributions (TVC) account to invest with the benefit of tax deduction</li>
</ol>

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Disclaimer: Fund information is obtained from MPFA&#39;s MPF fund platform updated as of 31 July 2019. Fund expense ratios are latest information based on scheme providers&#39; fact sheets.

Target Date Fund (TDF) and Default Investment Strategy (DIS) are both MPF products that automatically adjust investment strategy to fit your retirement plans, best suited for you who have no time to spare for your MPF portfolio. Compare the two MPF plans here!

Target Date Fund (TDF) and Default Investment Strategy (DIS)

Staff benefits is a hot topic amongst the Hong Kong working population, with MPF being one of the most talked about subjects due to its impact towards an employee&#39;s retirement. Whilst the standard for the mandatory employer contributions is 5% for each employee, many employers go beyond and offer higher contributions. 
The fact is not all of us can rely on our employers, but it is still possible to be better prepared for retirement on your own. How? You can choose to make additional voluntary contributions to your MPF.
<h2 id="what-are-voluntary-contributions">What are Voluntary Contributions?</h2>
Voluntary Contributions can be divided into Employee Voluntary Contributions (Employee VC), Special Voluntary Contributions (SVC) and Tax deductible Voluntary Contributions (TVC). Despite having similar names, these three work quite differently. 
Employee Voluntary Contributions (Employee VC)
You can set up your Employee VC via your employer with the monthly contributions based on your income, where accrued benefits can be withdrawn or transferred at the end of your employment. Some employers may offer voluntary contributions as part of their staff benefits where the accrued benefits can be withdrawn or transferred according to the terms made in the employment contract at employment termination. 
If you are satisfied with the performance of your employer’s MPF provider, you choose to increase your employee contributions to more than 5% under the same scheme to scale up your MPF investments and savings. Employee VC can be completely withdrawn or transferred at the end of your employment.
Special Voluntary Contributions (SVC)
SVC is not related to your employer. It is more flexible given you can select your own trustees and liaise with the them directly to open an account. You dictate how much you would like to contribute, which does not have to be fixed and you can withdraw or transfer the accrued benefits anytime (Note: Arrangements vary among different providers). Unlike Employee VC, you can withdraw the accrued benefits in your SVC account anytime (without having to wait till you leave the company), making it a more flexible investment tool.
Tax Deductible Voluntary Contributions (TVC)
The government introduced tax deductions for deferred annuity premiums and Mandatory Provident Fund Tax Deductible Voluntary Contributions (TVCs) to encourage voluntary savings for retirement, with the maximum deductible amount being capped at $60,000. However, TVC can only be withdrawn at the age of 65. Click <a href="https://www.planto.hk/en/blog/mpf-tax-deductible-voluntary-contribution-Fidelity">here</a> to learn more about TVC.
<table>
<thead>
<tr>
<th></th>
<th>Employee VC</th>
<th>SVC</th>
<th>TVC</th>
</tr>
</thead>
<tbody><tr>
<td>Account Opening</td>
<td>Via your employer</td>
<td>You choose your own trustee</td>
<td>You select your own TVC scheme</td>
</tr>
<tr>
<td>Contribution arrangements</td>
<td>The amount of contributions is based on your income; Regular contributions of a fixed amount; Contributions are made to the trustee via your employer.</td>
<td>The amount of contributions is not based on your income; Contributions amounts are not fixed; Contributions are made to the trustee by yourself.</td>
<td>The amount of contributions is not based on your income; Contributions amounts are not fixed; Contributions are made to the trustee by yourself.</td>
</tr>
<tr>
<td>MPF benefits withdrawal &amp; transfer</td>
<td>You can withdraw or transfer your MPF benefits only after ceasing employment.</td>
<td>You can withdraw or transfer your MPF benefits anytime; You can withdraw benefits several times a year. There may be a minimum amount for each withdrawal and a maximum number of withdrawal that could be made. Such rules vary among trustees.</td>
<td>You can withdraw your accrued benefits at age 65 (or on other statutory grounds); The accrued benefits are transferable to another TVC account anytime.</td>
</tr>
<tr>
<td>Tax deduction</td>
<td>Not tax deductible</td>
<td>Not tax deductible</td>
<td>Tax deductible</td>
</tr>
</tbody></table>
Source: <a href="http://minisite.mpfa.org.hk/MPFIE/en/decision-points/additional-contribution/">MPFA</a>/<a href="http://www.mpfa.org.hk/eng/mpf_system/system_features/tvc/index.jsp">MPFA TVC</a>
<h2 id="why-are-voluntary-contributions-important-">Why are Voluntary Contributions important ?</h2>
Hong Kong people have a long life expectancy
Hong Kong people are known to have high <a href="https://www.censtatd.gov.hk/hkstat/sub/so160.jsp">life expectancies</a>. The life expectancy of a male and a female are 82.2 and 87.6 respectively, with the retirement age being between 55-65. With an extra 20+ years after retirement, we have to be well prepared for life after employment and adding a bit more to our voluntary contributions can help with that.
It is a way to fight against <a href="https://www.socialindicators.org.hk/en/indicators/economy/11.3">inflation</a>
Aside from 1999 and 2004, Hong Kong has witnessed positive inflation rate in the past 30 years. This means that the purchasing power of the money you have today will likely be weakened over time if you just leave it in the bank or in cash. As such, increasing your MPF contributions is a great alternative to battling against inflation and keeping the value of your hard earned cash.
You can experience more of the power of compounding
The earlier you start investing, the more you will get upon retirement due to the power of compounding. The difference between making an additional few hundred dollars of contributions to your MPF and not making any could be significant in the long term.
It’s a great way to learn about investing
Many of us want to invest, but aren’t comfortable or confident in investing in the markets by ourselves. Since MPF is mandatory for the working population in Hong Kong, it is a great way for beginners to take the opportunity to learn how investing works.
Try out our MPF calculator to project your MPF accrued benefits in the upcoming years:

<compounded-investment-calculator language="en" type="CONTRIBUTION" calculatorname="Fidelity3_en MPF Calculator"></compounded-investment-calculator>


(All currency is in HKD.)

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<next-steps-list lang="en" title="Learn more:">
 <next-steps-list-item type="content" link="https://www.planto.hk/en/blog/mpf-tax-deductible-voluntary-contribution-Fidelity" title="[MPF 101] Tax-deductible Voluntary Contributions (TVC) FAQ" subtitle="We have the answers to all your questions about TVC"></next-steps-list-item>
 <next-steps-list-item type="content" link="https://www.planto.hk/en/blog/mpf-asset-net-worth-fidelity" title="[MPF 101] See how your MPF grows over time" subtitle="Use our calculator to see how important your MPF will be to retirement"></next-steps-list-item>
</next-steps-list>


About Fidelity International
Fidelity International provides world class investment solutions and retirement expertise to institutions, individuals and their advisers &#8211; to help our clients build better futures for themselves and generations to come. As a private company we think generationally and invest for the long term. Helping clients to save for retirement and other long term investing objectives has been at the core of our business for 50 years.
FIL Investment Management (Hong Kong) Limited was established in Hong Kong in 1981 and is a subsidiary of Fidelity International. We have been managing retirement assets in Hong Kong since 1989. Fidelity is one of the largest MPF scheme providers in Hong Kong, offering members not only comprehensive product offerings but also competitive fees and professional services. With our outstanding investment capabilities and management quality, Fidelity MPF has captured a number of MPF industry awards over the years.
Today, Fidelity is the largest manager¹ in the ORSO employee choice market and the largest pure investment manager² to offer an MPF scheme.
Source:
¹ Willis Towers Watson “Manager Watch”, as at 31/12/2018.
² Mercer MPF Market Shares Report, as at 31/12/2018.
Important information
Investment involves risks. This material contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. The information contained in this material is only accurate on the date such information is published on this material. Opinions or forecasts contained herein are subject to change without prior notice. Reference to specific securities mentioned within this material (if any) is for illustrative purpose only and should not be construed as a recommendation to the investor to buy or sell the same. Any person considering an investment should seek independent advice. FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited. This material is issued by FIL Investment Management (Hong Kong) Limited and Planto, and has not been reviewed by the Securities and Futures Commission.
This information is intended to be educational and is not tailored to the investment needs of any specific investor. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment or action.
The results of the projection of MPF accrued benefits is calculated based on certain assumptions and it is for reference only.
Investment involves risks. Past performance is no guarantee of future results. The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
The third party mark appearing in this material is the property of the respective owner and not by Fidelity.
This material may contain materials from third parties which are supplied by companies that are not affiliated with any Fidelity entity (&quot;Third Party Content&quot;). Fidelity has not been involved in the preparation, adoption or editing of such third party materials and does not explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed on third party materials are solely those of the independent providers, not of Fidelity. Third Party Content is provided for informational purposes only.

Voluntary Contributions can be divided into Employee Voluntary Contributions (Employee VC), Special Voluntary Contributions (SVC) and Tax deductible Voluntary Contributions (TVC). Despite having similar names, these three work quite differently.

[MPF 101] Voluntary Contributions? – A breakdown of the three types

The MPF scheme requires employers and employees to contribute a minimum 5% of the employee’s monthly income. What if an employee made additional voluntary contributions (“VC”)? How would it impact the total MPF accrued benefits?
 Let’s say Sally and Candy have the same monthly income. Sally started to contribute an additional 1% monthly income to the MPF account after getting paid for the first time at age 23, whilst Candy does not add any VC to her MPF account.
<img decoding="async" src="http://34.96.221.168/wp-content/uploads/2019/12/en-fidelity-2-ct-_2_revised.jpg" alt="">
From the above, you can see that by contributing an additional 1%, Sally’s pool of retirement funds is higher than Candy by almost $600,000 when they reach 65.
What if, lets say, 20 years later, Candy realises she has missed out and tries to keep up by making 2% of VC to her MPF. Can she keep up with Sally?
<img decoding="async" src="http://34.96.221.168/wp-content/uploads/2019/12/en-fidelity-2-ct-_3_revised.jpg" alt="">
As you can see, even though her VC are 1% more than Sally’s, her overall accrued benefits are still lower. This shows that contributing more early on can definitely give you a head start. Why? Because of the power of compound interest. The earlier you start making additional VC , the bigger the snowball effect.
1% or 2% of your monthly income may only worth few cups of coffee today but it would be a significant portion of retirement assets in the long term if you allocate it to your MPF. Would you give up your daily morning Starbucks for the potential to increase your net worth at retirement?
Try out our MPF calculator to project your MPF accrued benefits in the upcoming years:

<compounded-investment-calculator language="en" type="CONTRIBUTION" calculatorname="Fidelity2_en MPF Calculator"></compounded-investment-calculator>


(The numbers in the above case uses the same assumptions in the Planto MPF calculator. All currency is in HKD.)

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<next-steps-list lang="en" title="Learn more:">
 <next-steps-list-item type="content" link="https://www.planto.hk/en/blog/mpf-tax-deductible-voluntary-contribution-Fidelity" title="[MPF 101] Tax-deductible Voluntary Contributions (TVC) FAQ" subtitle="We have the answers to all your questions about TVC"></next-steps-list-item>
 <next-steps-list-item type="content" link="https://www.planto.hk/en/blog/mpf-asset-net-worth-fidelity" title="[MPF 101] See how your MPF grows over time" subtitle="Use our calculator to see how important your MPF will be to retirement"></next-steps-list-item>
 <next-steps-list-item type="content" link="https://www.planto.hk/en/blog/MPF-special-voluntary-contribution-comparison-advantages" title="[MPF 101] The three kinds of Voluntary Contributions" subtitle="See the difference between Employee VC, SVC and TVC"></next-steps-list-item>
</next-steps-list>


About Fidelity International
Fidelity International provides world class investment solutions and retirement expertise to institutions, individuals and their advisers &#8211; to help our clients build better futures for themselves and generations to come. As a private company we think generationally and invest for the long term. Helping clients to save for retirement and other long term investing objectives has been at the core of our business for 50 years.
FIL Investment Management (Hong Kong) Limited was established in Hong Kong in 1981 and is a subsidiary of Fidelity International. We have been managing retirement assets in Hong Kong since 1989. Fidelity is one of the largest MPF scheme providers in Hong Kong, offering members not only comprehensive product offerings but also competitive fees and professional services. With our outstanding investment capabilities and management quality, Fidelity MPF has captured a number of MPF industry awards over the years.
Today, Fidelity is the largest manager¹ in the ORSO employee choice market and the largest pure investment manager² to offer an MPF scheme.
Source:
¹ Willis Towers Watson “Manager Watch”, as at 31/12/2018.
² Mercer MPF Market Shares Report, as at 31/12/2018.
Important information
Investment involves risks. This material contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. The information contained in this material is only accurate on the date such information is published on this material. Opinions or forecasts contained herein are subject to change without prior notice. Reference to specific securities mentioned within this material (if any) is for illustrative purpose only and should not be construed as a recommendation to the investor to buy or sell the same. Any person considering an investment should seek independent advice. FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited. This material is issued by FIL Investment Management (Hong Kong) Limited and Planto, and has not been reviewed by the Securities and Futures Commission.
This information is intended to be educational and is not tailored to the investment needs of any specific investor. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment or action.
The results of the projection of MPF accrued benefits is calculated based on certain assumptions and it is for reference only.
Investment involves risks. Past performance is no guarantee of future results. The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
The third party mark appearing in this material is the property of the respective owner and not by Fidelity.
This material may contain materials from third parties which are supplied by companies that are not affiliated with any Fidelity entity (&quot;Third Party Content&quot;). Fidelity has not been involved in the preparation, adoption or editing of such third party materials and does not explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed on third party materials are solely those of the independent providers, not of Fidelity. Third Party Content is provided for informational purposes only.

What if an employee made additional voluntary contributions (“VC”)? How would it impact the total MPF accrued benefits? 

[MPF 101] Voluntary contributions (VC) – What happens if you contributed more to your MPF?

“Another 5% from my salary!”
The Mandatory Provident Fund (MPF) has often been criticised and misunderstood by the Hong Kong public. This stems mainly from the hype around poor fund performances and the deliberate 5% mandatory deduction from employees’ salaries as part of the scheme. 
However, contrary to popular belief, MPF forms a valuable part of your assets and plays an important part in determining your personal net worth in the future. 
What is personal net worth?
Personal net worth refers to all your assets minus your liabilities. Knowing your personal net worth is an important step of financial planning.
<img decoding="async" src="http://34.96.221.168/wp-content/uploads/2019/12/en-fidelity-1-ct-_final.jpg" alt="">
Your MPF can be worth millions and play a significant part of your net worth &#8211;
According to the statistics of <a href="http://www.mpfa.org.hk/eng/information_centre/statistics/mpf_schemes_statistical_digest/files/December_2018_Issue.pdf">MPFA</a> in 2018, there are around 2.8 millions of employees in Hong Kong who participated in the MPF scheme, making a total of 9.7 million MPF accounts and $813 billions of total assets. To most employees, their MPF accrued benefits can reach millions when they retire, making it a critical asset not to be ignored.
As an example, we have 23 year old Stephen, a typical recent Hong Kong graduate who earns $15,000 per month. With the mandatory contributions made by his employer and himself at 5% of income each, his expected MPF accrued benefits will be $4,469,119 by the time he is 65 years old!
<img decoding="async" src="http://34.96.221.168/wp-content/uploads/2019/12/en-fidelity-1-ct-_2_revised.jpg" alt="">
Start taking your MPF more seriously now
It is important to be clear that MPF is not a monthly expense, nor a far-fetched retirement plan. It is an investment vehicle in your hands. If you manage it wisely, it will turn into a valuable asset for your retirement.
Try out our MPF calculator to project your MPF accrued benefits in the upcoming years: 


<compounded-investment-calculator language="en" type="MPF" calculatorname="Fidelity1_en MPF Calculator"></compounded-investment-calculator>


It is also important to note that additional voluntary contributions (even as small as 1% of your monthly salary) can have a significant impact on your long term personal net worth. Check out how by clicking on the below!
(The numbers in the above case uses the same assumptions in the Planto MPF calculator. All currency is in HKD.)
Learn more:
<a href="https://www.planto.hk/en/blog/mpf-voluntary-contribution-investment-Fidelity">[MPF 101] Voluntary contributions (VC) &#8211; What happens if you contributed more to your MPF?</a>
<a href="https://www.planto.hk/en/blog/MPF-special-voluntary-contribution-comparison-advantages">[MPF 101] Voluntary Contributions? &#8211; A breakdown of the three types</a>
<a href="https://www.planto.hk/en/blog/mpf-tax-deductible-voluntary-contribution-Fidelity">[MPF 101] Tax Deductible Voluntary Contributions &#8211; FAQ</a>


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About Fidelity International
Fidelity International provides world class investment solutions and retirement expertise to institutions, individuals and their advisers &#8211; to help our clients build better futures for themselves and generations to come. As a private company we think generationally and invest for the long term. Helping clients to save for retirement and other long term investing objectives has been at the core of our business for 50 years.
FIL Investment Management (Hong Kong) Limited was established in Hong Kong in 1981 and is a subsidiary of Fidelity International. We have been managing retirement assets in Hong Kong since 1989. Fidelity is one of the largest MPF scheme providers in Hong Kong, offering members not only comprehensive product offerings but also competitive fees and professional services. With our outstanding investment capabilities and management quality, Fidelity MPF has captured a number of MPF industry awards over the years.
Today, Fidelity is the largest manager¹ in the ORSO employee choice market and the largest pure investment manager² to offer an MPF scheme.
Source:
¹ Willis Towers Watson “Manager Watch”, as at 31/12/2018.
² Mercer MPF Market Shares Report, as at 31/12/2018.
Important information
Investment involves risks. This material contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. The information contained in this material is only accurate on the date such information is published on this material. Opinions or forecasts contained herein are subject to change without prior notice. Reference to specific securities mentioned within this material (if any) is for illustrative purpose only and should not be construed as a recommendation to the investor to buy or sell the same. Any person considering an investment should seek independent advice. FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited. This material is issued by FIL Investment Management (Hong Kong) Limited and Planto, and has not been reviewed by the Securities and Futures Commission.
This information is intended to be educational and is not tailored to the investment needs of any specific investor. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment or action.
The results of the projection of MPF accrued benefits is calculated based on certain assumptions and it is for reference only.
Investment involves risks. Past performance is no guarantee of future results. The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
The third party mark appearing in this material is the property of the respective owner and not by Fidelity.
This material may contain materials from third parties which are supplied by companies that are not affiliated with any Fidelity entity (&#8220;Third Party Content&#8221;). Fidelity has not been involved in the preparation, adoption or editing of such third party materials and does not explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed on third party materials are solely those of the independent providers, not of Fidelity. Third Party Content is provided for informational purposes only.

Contrary to popular belief, MPF forms a valuable part of your assets and plays an important part in determining your personal net worth in the future. 

[MPF 101] MPF – Your hidden millions

The government introduced tax deductions for deferred annuity premiums and Mandatory Provident Fund Tax Deductible Voluntary Contributions (TVC) on 1 Apr 2019 with the maximum deductible amount being capped at $60,000. Let’s take a look at how it works.
1. What is Tax Deductible Voluntary Contributions (TVC)?
TVC aims at encouraging Hong Kong people to save more for their retirement. Employees would need to set up a new TVC account and make voluntary contributions to their TVC account to enjoy the tax deductions.
2. What is the cap for tax deductions?
$60,000. Note that this tax deductions cap applies to both TVC and Qualifying Deferred Annuity Policy (QDAP). For example, if you spend $40,000 on TVC, and $30,000 for QDAP, your tax deduction limit is still $60,000 for the $70,000 you spent on both.
3. Are all Voluntary Contributions (VC) schemes eligible for tax deductions?
No. You can only withdraw your TVC contributions at age 65 or on other statutory grounds. Although employees can make VC not restricted by this requirement, however, these VC would not be tax deductible.
4. In terms of tax deductions, what is the difference between TVC and Mandatory Contributions (MC)? Can I use both?
Before the introduction of TVC, only MC (maximum of $18,000) are tax deductible. With the new policy, tax deductions from TVC will be calculated after your MC tax deductions, but the respective maximum deductions are still $18,000 and $60,000 respectively.
5. When can I apply for TVC?
The new policy will be implemented for the year 2019/20 tax assessment, with the related applications to be submitted in 2020.
Examples of TVC with salary of $15,000, $20,000, $30,000 and $60,000.
<table>
<thead>
<tr>
<th>Monthly Income ($)</th>
<th>Original Salaries Tax ($)</th>
<th>MC ($)</th>
<th>TVC ($)</th>
<th>Tax payable after deductions ($)</th>
<th>Amount saved ($)</th>
</tr>
</thead>
<tbody><tr>
<td>15,000</td>
<td>780</td>
<td>9,000</td>
<td>9,000</td>
<td>600</td>
<td>180 (-23%)</td>
</tr>
<tr>
<td>20,000</td>
<td>3,760</td>
<td>12,000</td>
<td>12,000</td>
<td>3,040</td>
<td>720 (-19%)</td>
</tr>
<tr>
<td>30,000</td>
<td>17,700</td>
<td>18,000</td>
<td>18,000</td>
<td>14,880</td>
<td>2,820 (-16%)</td>
</tr>
<tr>
<td>60,000</td>
<td>78,900</td>
<td>18,000</td>
<td>60,000</td>
<td>68,700</td>
<td>10,200 (-13%)</td>
</tr>
</tbody></table>
Note: The calculations are based on the <a href="https://www.ird.gov.hk/eng/ese/st_comp_2018_19_budget/stcfrm.htm">Salaries Tax Computation</a> from Inland Revenue Department in 2018/2019. The above examples are for single persons who only enjoy the basic amount of allowance (HK$132,000) and MPF MC tax reduction. For the first three cases, the MC are equal to their TVC, therefore they cannot utilize the $60,000 tax reduction. 
The last example is based on the upper limit of $60,000 tax deduction limit, but it doesn’t mean that all taxpayers can enjoy the $10,200 tax deductions.The amount of tax refunds depends on various factors including one’s income, allowances, tax deductions for QDAP and TVCs.
Reference: <a href="http://www.mpfa.org.hk/eng/mpf_system/system_features/tvc/index.jsp">MPFA</a> / <a href="https://www.legco.gov.hk/yr18-19/english/bills/brief/b201812071_brf.pdf">LegCo</a>
(All currency is in HKD.)
Learn more:
<a href="https://www.planto.hk/en/blog/MPF-special-voluntary-contribution-comparison-advantages">[MPF 101] Voluntary Contributions? &#8211; A breakdown of the three types</a>
<a href="https://www.planto.hk/en/blog/mpf-asset-net-worth-fidelity">[MPF 101] MPF &#8211; Your hidden millions</a>
<a href="https://www.planto.hk/en/blog/mpf-voluntary-contribution-investment-Fidelity">[MPF 101] Voluntary contributions &#8211; What happens if you contributed more to your MPF?</a>

<banner-ad partner="FIDELITY" language="en"></banner-ad>


About Fidelity International
Fidelity International provides world class investment solutions and retirement expertise to institutions, individuals and their advisers &#8211; to help our clients build better futures for themselves and generations to come. As a private company we think generationally and invest for the long term. Helping clients to save for retirement and other long term investing objectives has been at the core of our business for 50 years.
FIL Investment Management (Hong Kong) Limited was established in Hong Kong in 1981 and is a subsidiary of Fidelity International. We have been managing retirement assets in Hong Kong since 1989. Fidelity is one of the largest MPF scheme providers in Hong Kong, offering members not only comprehensive product offerings but also competitive fees and professional services. With our outstanding investment capabilities and management quality, Fidelity MPF has captured a number of MPF industry awards over the years.
Today, Fidelity is the largest manager¹ in the ORSO employee choice market and the largest pure investment manager² to offer an MPF scheme.
Source:
¹ Willis Towers Watson “Manager Watch”, as at 31/12/2018.
² Mercer MPF Market Shares Report, as at 31/12/2018.
Important information
Investment involves risks. This material contains general information only. It is not an invitation to subscribe for shares in a fund nor is it to be construed as an offer to buy or sell any financial instruments. The information contained in this material is only accurate on the date such information is published on this material. Opinions or forecasts contained herein are subject to change without prior notice. Reference to specific securities mentioned within this material (if any) is for illustrative purpose only and should not be construed as a recommendation to the investor to buy or sell the same. Any person considering an investment should seek independent advice. FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited. This material is issued by FIL Investment Management (Hong Kong) Limited and Planto, and has not been reviewed by the Securities and Futures Commission.
This information is intended to be educational and is not tailored to the investment needs of any specific investor. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment or action.
The results of the projection of MPF accrued benefits is calculated based on certain assumptions and it is for reference only.
Investment involves risks. Past performance is no guarantee of future results. The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
The third party mark appearing in this material is the property of the respective owner and not by Fidelity.
This material may contain materials from third parties which are supplied by companies that are not affiliated with any Fidelity entity (&quot;Third Party Content&quot;). Fidelity has not been involved in the preparation, adoption or editing of such third party materials and does not explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed on third party materials are solely those of the independent providers, not of Fidelity. Third Party Content is provided for informational purposes only.

The government introduced tax deductions for deferred annuity premiums and Mandatory Provident Fund Tax Deductible Voluntary Contributions (TVC) on 1 Apr 2019 with the maximum deductible amount being capped at $60,000. Let’s take a look at how it works

[MPF 101] Tax Deductible Voluntary Contributions – FAQ

Chinese New Year is approaching and it is the red packet season again. If you are not Chinese, you may wonder what this little red envelope people give to each other during CNY is and what etiquettes you may need to follow. Here is everything you need to know about red packets in time for the year of the pig!
Red packet – The money that brings luck
In traditional Chinese culture, elderlies would give younger relatives in the family red packets to give them blessings for the new year. The red envelope represents happiness and peace. It was even seen as a power against the evil spirits in ancient culture. In modern society, this lovely tradition is extended to workplaces and between acquaintances where employers and seniors would give out red packets as “lucky money” to thank their juniors for working hard in the past year.
Should I give out red packets?
Generally, only married people have to give out red packets. However, if you hold a senior position in your company, even if you are not married, it is still a common practice to give red packets to your team as an appreciation for their hard work and as a New Year blessing.
How much should you put in a red packet?
Red packets often come in two, representing both people of a married couple. The general rule is, the closer you are with the receiver the higher the amount. Usually for acquaintances like colleagues and neighbours, it would be $10 &#8211; $20 per packet. For close family members however, it can go up to $500 or even $1,000 per packet.
Do’s and Dont’s when receiving and giving red packets
Since red packets represent blessings from the elderly, when you receive a red packet, it is appropriate for you to receive it with both hands and say nice things like “Happy New Year” and “Wish you a healthy and happy year”. Note that it is very impolite to accept a red envelope with one hand. If you are giving out red packets, avoid putting coins in red packets and always make sure the amount of money is an even number because Chinese people only give out envelopes with an odd amount of cash in funerals.
When technology meets tradition – Cashless red packet
Red packets have also made technological advancements to cater to the cashless era. DBS has already launched <a href="https://www.finews.asia/finance/28134-dbs-red-packets-go-cashless">cashless red packets</a> in Singapore where money can be easily transferred by scanning a QR code, adding a nice touch of modernity and convenience to this historic traditional cultural practice. The annual Chinese New Year TV program &#8211; CCTV Spring Festival Gala &#8211; also launched an <a href="https://m.chinaknowledge.com/News/DetailNews/84842/">interactive activity</a> where audiences can earn red packets by shaking, searching and watching video clips on Baidu app. Even not during Chinese New Year, some Chinese apps like <a href="https://blog.wechat.com/2016/01/27/we-chat-about-wechat-5-red-packets-wechats-secret-weapon-in-payments/">Wechat</a> allow you to send your contacts (or even yourself) electronic red packets as gifts.
Red packet promotions
To celebrate the tradition of red packets, many Chinese finance apps like <a href="https://www.alipay.com/">Alipay</a> and <a href="https://pay.weixin.qq.com/index.php/public/wechatpay">Wechat pay</a> offer red packets to their loyal users. For example, Alipay announced that it will spend <a href="http://www.china.org.cn/business/2019-01/25/content_74408531.htm">500 million RMB</a> on red packets for users. Stay tuned to these flash promotions to earn some extra cash!
Chinese kids have always loved the red packet culture. To most children, red packets are their sole source of income throughout the year. To parents, the red packet culture is a nice way to implant personal finance concepts to children starting from a young age. Let’s see how many red packets you are getting this year!

If you are not Chinese, you may wonder what is this little red envelope people give to each other during the CNY and what etiquettes you may need to follow. Here are some guidelines for the Year of Pig and everything you need to know about red packets.

Things you should know about Red Packets for CNY

Graduation marks the start of a new stage in life. Unfortunately for Hong Kong millennials, it also comes with new types of challenges. According to a <a href="https://amp.scmp.com/news/hong-kong/education/article/2178402/hong-kong-university-graduates-take-home-less-pay">study</a> by New Century Forum, the median monthly starting salary of a university graduate is $14,396 in 2017, almost $6,000 less than their counterparts 30 years ago.
With limited income, some fresh graduates might get lost in the full city life in Hong Kong. With the soaring property prices and living costs, financial planning is essential to those who wants a stable quality of life. The first step to this is to understand the common financial mistakes fresh graduates make and how to avoid them. Let’s see if it rings a bell 😉
<h2 id="1-lack-of-financial-management">1. Lack of financial management</h2>
After getting their first job, some graduates may be overwhelmed by their first paycheck and may be prone to overspending, especially in a place that was dubbed as having <a href="https://www.scmp.com/news/hong-kong/education-community/article/2093298/hongkongers-shopping-habits-among-unhealthiest">one of the unhealthiest shopping habits in the world</a>. The lack of control on spending may lead to post purchase regrets and, even worse, debt accumulation. A way for graduates to avoid this is to adopt a habit of using expense tracking apps like <a href="https://www.planto.hk/en/">Planto</a> to help manage their finances by setting a monthly budget and monitoring their expenses.
<h2 id="2-spending-too-much-on-housing">2. Spending too much on housing</h2>
Housing is an eternal problem for everyone in Hong Kong. Being the<a href="https://www.scmp.com/news/hong-kong/hong-kong-economy/article/2178308/hong-kong-ranked-sixth-most-expensive-city-expats"> sixth most expensive city for expats to live in</a>, rent can get very expensive for expats and locals who want to live independently. According to Jim Wang, a blogger from Wallethacks, one should maintain a <a href="https://wallethacks.com/money-ratios/#20-30-50-Budgeting-Ratio">20-30-50 </a>budgeting ratio when it comes to daily expenses, meaning one should spend around 30% of their income on housing.
<img decoding="async" src="http://34.96.221.168/wp-content/uploads/2019/12/20190107_1_graduate_1.png" alt="null" />
Although expensive, graduates can also be smart about how much to spend on housing. Luckily, they now have more housing options with the new trend of co-living spaces like <a href="https://www.weavecoliving.com/">Weave</a> and <a href="https://co-living.hk/">Bibliotheque</a>. Not only can one save money on living, one might also get to know interesting people!
<img decoding="async" src="http://34.96.221.168/wp-content/uploads/2019/12/20190107_1_graduate_2.png" alt="null" />
<h2 id="3-high-entertainment-cost">3. High entertainment cost</h2>
Sure, in a metropolitan like Hong Kong, you can always party all night long. However, the cost for an exciting life, or nightlife, in Hong Kong can be pretty high. It is not hard to spend $500 if you go out for food and drinks with your friends without proper planning. However, it is a mistake to think that this is the only way to have fun in Hong Kong. There are many low cost alternatives. These including going on <a href="https://www.hiking.gov.hk/eng/index.htm">hiking trails</a> that have magnificent views and planning your night out properly by using some amazing apps that provide awesome discounts like <a href="https://www.theentertainerme.com/#null">The Entertainer</a> and <a href="https://www.google.com/search?q=storellet&amp;oq=storellet&amp;aqs=chrome..69i57.2128j0j4&amp;sourceid=chrome&amp;ie=UTF-8">Storellet</a>.
<h2 id="4-neglecting-investments">4. Neglecting investments</h2>
Investing might seem far to fresh graduates. However, there are loads of advantages of investing early in life such as having the capacity to take on more investment risks and making use of the power of compounding. There are many <a href="https://www.investopedia.com/articles/basics/06/invest1000.asp">resources available online</a> that teaches beginners on how to invest. Well-planned investments can improve overall financial stability, increase savings and help you achieve your financial goals.
<h2 id="5-poor-credit-card-management">5. Poor credit card management</h2>
Once you have a stable income, you can start applying for credit cards. It certainly brings a lot of convenience in life, especially in such a cashless society. Yet, to some, it might be a pandora’s box opening. Instant gratification might be tempting, but it could be very dangerous. According to a <a href="https://www.scmp.com/news/hong-kong/economy/article/1866897/spending-theres-no-tomorrow-hongkongers-aged-18-35-use-36">study</a> by Hong Kong University&#8217;s public opinion programme, Hong Kong people aged 18 – 35 spend 36% of their monthly income on purchases made with credit cards and take 19 months to pay back their loans. The scariest thing about credit card debts is the snowball effect. If you ignore it, it could become a serious financial burden and may even affect your credit scores.
If you are a recent graduate and need an extra hand, you can always check out some useful personal finance apps like <a href="https://www.planto.hk/en/">Planto</a> to track your expenses and give you due date reminders. Planto helps you manage your finances so that you can reach your life goals such as buying your first home, travelling around the world or getting married.

With limited income, some fresh graduates might get lost in the full city life in Hong Kong. With the soaring property prices and living costs, financial planning is essential to those who wants a stable quality of life. The first step to this is to understand the common financial mistakes fresh graduates make and how to avoid them. Let’s see if it rings a bell ;)

Common financial mistakes made by fresh graduates

Managing and monitoring your MPF is not an easy task. MPF management is becoming a growing concern for many, as according to the MPFA, the average number of personal accounts that are being managed by each HKer is increasing due to frequent job changes. As such, more and more people are opting to consolidate their accounts. 
Some people choose to consolidate out of convenience, whilst others opt out to keep their portfolios diversified so to reduce risks. Let’s look at the pros and cons of consolidation and how <a href="https://www.planto.hk/en/mpf/?af=29be30f4">Planto helps</a> those who want the best of both worlds. 
Why Consolidate?
Convenience is the major reason people choose to consolidate their MPFs. Not only do you save time from logging into multiple accounts, it is also much easier to track your balances and fund performances, as well as make any changes on your portfolios. Investment analysis and decision-making can also be done more easily and you are able to get an overview of your gains and losses. 
Why to NOT Consolidate?
There are drawbacks to consolidating your accounts with one single MPF service provider. With consolidation, you are putting all your eggs in one basket, which limits the number of funds you can choose to invest in. Providers manage funds very differently, which results in varying fund compositions and portfolio performances. 
For instance, the 1 year annualised return and management fee for the North American Equity Fund is different under AIA and HSBC according to the <a href="https://fpp.mpfa.org.hk/english/mpp_glossary.jsp#Constituent_Fund">MPFA</a>. The former has a 2.03% return with a 1.83% management fee whilst the latter has 2.5% and 1.35% respectively. As such, having multiple MPF providers may be a better choice for those who are more risk averse. It is also important for you to study the performances of your desired funds under different trustees and make use of the Employee Choice Arrangement to allocate your MPF contributions. 
If you don’t want to go through the hassle of understanding and managing your multiple accounts, you can also opt for the <a href="http://minisite.mpfa.org.hk/dis/en/index.html">Default Investment Strategy (DIS)</a>, which has been implemented for those who are too busy to manage their MPF accounts. This ready-made investment solution combines 2 mixed assets funds that automatically reduces investment risk according to members’ age. 
The solution
No one can ever say how many MPF accounts is enough, too much or too little. This is entirely up to you. Yet, it is commonly believed that consolidating your MPF accounts into 2 to 3 service providers can balance out sufficient risks. Sadly, we all know consolidation is a hassle because it means the offline process of phone calls, form-filling through MPFA and re-allocation of your portfolios. Although the new eMPF platform is launching with the objective of making things easier, members need to wait until 2022 for this process to become online.
This is why the Planto team has introduced the MPF consolidation function on the app. It is the best of both worlds. Not only can you see all your Hong Kong MPF accounts in one place, you can also get instant updates on your balances, portfolio breakdowns and performances whilst still keeping your portfolio diversified. Let us know what you think!
<h2 id="about-planto">About Planto</h2>
<a href="https://www.planto.hk/en/">Planto</a> is a Hong Kong fin-tech start-up that brings the new generation a revolutionary intelligent personal finance application. We are generously supported by iDendron, from The University of Hong Kong and Cyberport to help Hong Kong users to manage their finances and save money, starting their journeys towards life goals like purchasing a flat, getting married, travelling and studying.
Like the <a href="https://www.facebook.com/planto.hk/">Planto Facebook </a> page and follow our <a href="https://www.instagram.com/planto.hk/">Instagram</a> now to receive useful tips on personal finances!

Some people choose to consolidate out of convenience, whilst others opt out to keep their portfolios diversified so to reduce risks. Let’s look at the pros and cons of consolidation and how Planto helps those who want the best of both worlds. 

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