![[MPF 101] Voluntary contributions (VC) – What happens if you contributed more to your MPF?](https://d3pwh2ime6p0el.cloudfront.net/wp-content/uploads/2019/12/article-2-cover-en-768x402.jpg.webp)
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.
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?
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:
(The numbers in the above case uses the same assumptions in the Planto MPF calculator. All currency is in HKD.)
About Fidelity International
Fidelity International provides world class investment solutions and retirement expertise to institutions, individuals and their advisers – 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.
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