“Cancellation of MPF hedging” has been discussed in the community for 20 years, and the government members have been tugging for 10 years, and it was finally finalized yesterday. The Legislative Council passed the bill in third reading with 72 votes in favour, 5 against and 12 abstentions, but it will be implemented as soon as 2025. The authorities said that until the implementation of the “Easy MPF” platform and promotion of assisting employers in establishing special savings accounts, that is, wage earners will still have to wait three years at the earliest, and their MPF will not be available until they receive severance payment or long service payment. will be hedged. Luo Zhiguang, director of Labor and Welfare, described it as a historical moment, and Chief Executive Carrie Lam welcomed the press release, saying it was a major achievement of the current government in improving the retirement security system.
The abolition of MPF hedging has been discussed for a long time. The government has proposed a number of proposals, all of which have hit a wall. As for the final plan, in the first 25 years of implementation, the government will provide subsidies to employers to help the business sector transition and adapt, which will involve $33.2 billion in 2021.
According to the government plan (see table), if the employer’s annual severance payment and long service payment expenses are within 500,000 yuan, in the first 3 years of “unhedging”, the employer only needs to pay 50% of each employee’s related expenses, up to a maximum of 3,000 yuan, The rest of the government is borne; the employer’s burden increases to 55% in the fourth to sixth years and increases to 65% year by year, with a ceiling of 25,000 yuan; after that, the employer’s burden and ceiling continue to increase in stages, and the government will no longer subsidize it in the 26th year; if If the expenditure exceeds 500,000 yuan per year, the government will subsidize half of it for the first three years, and then decrease year by year, and no subsidy will be given in the 13th year. At that time, employers can save 1% of the MPF contribution in the special account every month to pay severance payment/long service payment.
According to the new plan, taking a wage earner with an 8-year seniority and a monthly salary of 18,000 yuan as an example, the severance pay/long-term service allowance should be 96,000 yuan, and the employer only needs to pay 9,600 yuan under the hedging plan. Withdrawal of 96,000 yuan in severance payment/long-term service payment, and the MPF account also retains the employer’s MPF contribution of 86,400 yuan. (See A4 for related news)
Originally published on AM730 https://www.am730.com.hk/local/pass-cancellation of MPF hedging-implementation as soon as 2025-the government subsidizes employers for 25 years/323340