Retirement Planning and Employee Benefits
This domain tests Hong Kong's retirement architecture and employee benefit design. You need MPF and ORSO rules, statutory entitlements, retirement-need projection, and the limits of public schemes.
Hong Kong retirement system
- The three pillars are MPF/ORSO, voluntary savings, and social security. MPF mandatory contributions are 5% employee plus 5% employer on relevant income, capped at HK$30,000 monthly, so maximum mandatory contribution is HK$1,500 each; minimum relevant income is HK$7,100.
- Employee mandatory contributions are fully vested. Employer mandatory contributions follow statutory vesting rules. Withdrawal is normally at 65; early grounds include permanent incapacity, terminal illness, small balance, and permanent departure. TVC and qualifying deferred annuity premiums may attract salary-tax deductions subject to caps.
- ORSO schemes are MPF-exempt occupational schemes. Benefits follow scheme rules, not MPF vesting.
Employee benefits
- Statutory benefits include annual leave, holidays, sickness allowance, maternity/paternity leave, severance payment or long service payment, Employees' Compensation Insurance, and MPF.
- Employer extras include group medical, group life, disability, and flexible benefits. Compare coverage, portability, tax treatment, and cost.
Retirement projection
- Use a replacement ratio, inflation, longevity, health costs, and post-retirement return. Stress-test lower returns and higher inflation.
Worked example. A client aged 35 retires at 65 and lives to 90. Current essential spending is HK$30,000 monthly and inflation is 2.5%. Future monthly need is 30,000×1.025³⁰ ≈ HK$62,900, or about HK$755,000 annually. At a 4% withdrawal rate, the required fund is about HK$18.9m. If MPF plus savings project to HK$8m, the gap is about HK$10.9m. The reasoning is to project in nominal dollars, then convert the saving target back to today's dollars.
Traps that cost marks: treating MPF as sufficient; ignoring 20-plus years of retirement; mixing nominal returns with real spending; forgetting health and long-term care; assuming ORSO benefits mirror MPF; and withdrawing MPF early without a statutory ground.