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The Government submitted to the Legislative Council today (May 29) the Mandatory Provident Fund Schemes Ordinance (Amendment of Schedule 2) Notice 2013 and the Mandatory Provident Fund Schemes Ordinance (Amendment of Schedule 3) Notice 2013 (collectively referred to as the Amendment Notices), which seek to increase both the minimum relevant income level (Min RI) and the maximum relevant income level (Max RI) under the Mandatory Provident Fund (MPF) System.
The Amendment Notices are to increase the monthly Min RI from $6,500 to $7,100 with effect from November 1, 2013, and the monthly Max RI from $25,000 to $30,000 with effect from June 1, 2014, and make corresponding amendments to the daily and annual Min RI and Max RI.
The Mandatory Provident Fund Schemes Ordinance (MPFSO) stipulates that the Mandatory Provident Fund Schemes Authority (MPFA) has to conduct a review of Min RI and Max RI at least once every four years. The existing Min RI has been set at $6,500 per month since November 2011 and the existing Max RI has been set at $25,000 per month since June 2012.
In the light of the implementation of the Statutory Minimum Wage (SMW) from May 1, 2011, the MPFA is currently conducting a review of the adjustment mechanism of the relevant income levels. As the current Min RI at $6,500 was set with reference to, among other factors, the initial SMW rate of $28 per hour, and considering that the SMW rate has been adjusted upwards to $30 per hour since May 1, 2013, the Government proposed to apply the methodology adopted in 2011 for adjusting Min RI, i.e. making reference to the SMW rate, to increase Min RI before the new adjustment mechanism is put in place.
A Government spokesman said, "Taking into account the time required for adjustment of systems by trustees and employers and the publicity on the revised relevant income levels, the effective date for the revised Min RI would be November 1, 2013.
"The proposal to revise Min RI to $7,100 would allow the lower-income group to continue to be spared the burden of making mandatory MPF contributions. We believe that the proposed level has struck a balance between addressing the basic retirement needs of the working population and maintaining their present livelihood."
The present Max RI at $25,000 was implemented in June 2012. A review conducted by the MPFA in 2010 showed that, according to the statutory adjustment factors, Max RI should be adjusted to $30,000. To address the concerns of employers' and employees' bodies at that time, the Government only raised Max RI from $20,000 to $25,000 after balancing different views.
The spokesman said, "Considering that Max RI should be increased to $35,000 based on the statistics for the third quarter of 2012 according to the statutory adjustment factors, the Government proposed to raise Max RI from $25,000 to $30,000. To allow employers and employees a longer time to adjust to the new contribution level, the effective date for the revised Max RI would be June 1, 2014."
At present, the MPFSO provides that, unless exempted, an employer and employee must each contribute 5 per cent of the employee's relevant income to an MPF scheme as mandatory contributions, while a self-employed person (SEP) must similarly contribute 5 per cent of his relevant income. However, if the relevant income of the employee or SEP concerned is less than Min RI, he is not required to make MPF contributions himself, although the employer still has to make MPF contributions for him. On the other hand, for a relevant employee whose relevant income is above Max RI, both he and his employer are not required to make mandatory contributions in respect of the excess relevant income. The same applies to an SEP.
Ends/Wednesday, May 29, 2013
Issued at HKT 18:00
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