FAQ

Mutual Fund

Interest rate risk

When a debt fund invests in fixed income securities, they may be subject to interest rate risk due to the rise or fall in interest rates.

 

Credit risk

This is applicable to the underlying fixed income securities of mutual funds. If a bond issuer cannot repay a bond it may end up being a worthless investment.

 

Lack of control

As much as mutual funds offer the convenience of investing, the investors cannot determine the exact composition of a fund’s portfolio, nor can they directly influence which securities the fund manager can buy.

While the above disclaimer holds true for these risks, investors are also advised to be aware of other regulatory risks or changes while investing.

 

Risk and Reward

The key to reducing risk is diversification or as the saying goes ‘don’t put all your eggs in one basket.’ The diversification that mutual funds provide can help to ease risk by offsetting losses of some securities with gains in others.

Professional management

When you invest in mutual funds, you may quit worrying about where and how to invest. Let your fund managers take a call based on thorough market research, monitoring and experience.

 

Diversification

Mutual funds can also invest in other assets like bonds, cash, or commodities like gold and other precious metals. This is called diversification and it allows you to reduce the risk of investing in one particular stock or sector. Additionally, it gives you a broader exposure to various stocks and sectors.

 

Liquidity

Mutual funds are more or less classified as liquid investments; unless guided by a pre-specified lock-in period. This means, as an investor you can redeem your unit holdings at any point (subject to exit load, if any) -- giving you any time access to your money. Further, funds are well integrated with the banking system -- which means that most funds can transfer money directly to your bank account.

Ease of investment 

You can invest in mutual funds either directly or through a financial advisor. A mutual fund allows you to start with small investments. For instance, a SIP lets you invest small amounts of money (as low as Rs. 500) at regular intervals – helping you achieve your financial goals through disciplined and systematic investing.

 

Variety in investing 

Mutual Funds offer multiple scheme options depending upon your financial goal, risk appetite and time horizon.

 

Transparency 

Investors can stay updated on information pertaining to the markets and schemes by logging on to our website or calling our customer care. They can view factsheets, offer documents, annual reports, etc.

 

Open ended funds

Open ended funds allow investors to subscribe or redeem units as per the prevailing Net Asset Value (NAV) on a continuous basis. Basically, what you get with open ended funds is liquidity and flexibility of time.


 

Close ended funds

Listed on the stock exchange, these funds come with a fixed maturity date, like 3-6 years. Investors can opt to subscribe to close ended funds at the time of initial launch.

 

Interval Funds

These funds are a hybrid of open and close ended funds. While they operate mainly as close ended funds, these funds may trade on stock exchanges and are open for sale or redemption at predetermined intervals at the prevailing NAV.

 

Equity/Growth Funds

If you are investing in equity growth funds, then you are largely putting your money in stocks. The main objective of these funds is to achieve long-term capital growth. Equity funds invest at least 65% of their corpus in equity and equity-related securities. These funds may invest in a wide range of industries/sectors or focus on one or more sectors. These funds are suitable to invest in if you have a higher risk appetite and you have a long-term financial goal.

 

Debt/Income Funds

Following a simpler approach, debt/income funds usually invest 65% of the amount in fixed income securities such as bonds, corporate debentures, government securities (gilts) and money market instruments. These funds are likely to be less volatile than equity funds.

 

Balanced Funds

With an aim to provide stability of returns and capital appreciation, balanced mutual funds invest in both equities and fixed income instruments. These funds generally tend to invest around 60% in equity and 40% in debt instruments such as bonds and debentures.

 

Money Market/Liquid Funds

If you are looking for a fund that offers liquidity and capital preservation with moderate income, then this is a suitable choice. Money market/liquid funds invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit and Commercial Paper for less than 91 days. These funds are ideal to invest in if you are a corporate or an individual investor and wish to earn moderate returns on surplus funds.

 

Gilt Fund

Gilt mutual funds invest exclusively in government securities. The Gilt funds do not carry a credit risk - where the issuer of the security can default. However, it comes with an interest rate risk i.e. risk due to the rise or fall in interest rates.

 

Tax Saving (Equity Linked Savings Schemes/ELSS) Funds

The Income Tax Act offers tax deduction under specific provisions of the Income Tax Act, 1961. Designed to generate capital growth, ELSS mutual funds invest primarily in equities and largely suit investors with a higher risk appetite for capital appreciation. Spread over medium to long-term, tax saving funds comes with a lock-in period of 3 years.


 

Index Funds

Index funds are attached to a particular index such as the BSE SENSEX or the S&P CNX NIFTY. Their performance is linked to the results of that index. Here, the portfolio comprises stocks that represent an index and the weightage assigned to each stock is in line with the identified index. Hence, the returns will be more or less similar to those generated by the Index.


 

Sector-specific Funds

Sector-specific funds invest in the securities of a specific sector or industry such as FMCG, Pharmaceuticals, IT, etc. The returns on these funds are directed by the performance of the respective sector/industries.

Sector funds allow an investor to diversify funds across multiple companies within an industry. These funds tend to be riskier as the performance is directly linked to that of the overall sector.

 

TVC

TVC is a simple, convenient and flexible arrangement for retirement savings. Eligible persons can open TVC accounts in any MPF schemes which offer such accounts and make contributions directly to the accounts.

The following persons are eligible to open a TVC account in an MPF scheme:

 

  1. Holders of contribution accounts or personal accounts of MPF schemes; or
  2. Members of MPF Exempted ORSO Schemes.

You can open a TVC account and make contributions directly to the account. You can then enjoy tax deduction under salaries tax or tax under personal assessment for your TVC.

 

The maximum tax deduction cap per year is $60,000, which is an aggregate limit for TVC and qualifying deferred annuity policies premiums.

 

If you have more than one TVC account, the maximum tax deduction cap applies to the total amount of contributions of all of your TVC accounts.

 

To facilitate your filing of tax return, MPF trustee will provide a TVC contribution summary to you each year.

Tax concessions on TVC starts from 1 April 2019. You can claim deductions when you fill in the tax return for the year of assessment 2019/20 for your TVC made from 1 April 2019 to 31 March 2020.

The current tax deductions for mandatory contributions will not be affected by the implementation of TVC.

Majority of the master trust schemes would offer TVC accounts. You can call MPFA hotline 2918 0102 or refer to Trustee Service Comparative Platform in the MPFA’s website (www.mpfa.org.hk) to check the MPF schemes which offer TVC accounts from 1 April 2019.

You can transfer all balance in a TVC account to another TVC account under a different scheme at any time.

 

If you wish to transfer the balance in a TVC account to another MPF scheme, all you need to do is to fill in the "Scheme Member's Request for Transfer of TVC" (Form MPF(S)-P(T)) and then send it to your new scheme trustee. The form can be obtained from your trustee or downloaded from MPFA’s website.

To meet the purpose of encouraging extra savings for retirement, TVC will be subject to preservation requirements. You can only withdraw TVC account balance upon reaching 65 years of age, or on other statutory grounds. Contributions exceeding the tax deduction cap cannot be withdrawn early either.

 

Withdrawal arrangement of TVC is the same as that of other MPF contributions. You should submit the completed claim form to your MPF trustee and provide the supporting documents required.

If you wish to benefit from tax deductions under salaries tax or personal assessment, you must put the TVC in a TVC account. Your voluntary contributions made to your existing contribution account are not TVC and such contributions are not tax deductible.

You can only have one TVC account in an MPF scheme, but you may have more than one TVC account in more than one MPF scheme.

Similar to other types of contributions, you have the right to choose the constituent funds offered by the MPF scheme. If you have not given any investment instructions, your TVC will be invested according to the Default Investment Strategy.

General / Others

An employer will be the final decision-maker when choosing an MPF trustee or service provider. However, employees can nominate any MPF provider to preserve their MPF benefits upon termination of employment.

Yes. An employee can contribute more than the statutory amount of MPF contributions. If the employee elects to do so, an employer must assist in deducting the agreed amount from the monthly salary and forwarding the contributions to the MPF trustee. However, the employer does not have any obligation to match the amount of an employee's voluntary contributions.

Yes. An employer can use the accrued benefits in the MPF scheme that are attributable to the employer's contributions to offset any Long Service Payment (LSP) or Severance Payment.

 

For example, if the accrued benefits are more than the LSP, the employer can withdraw an amount equal to the LSP to fulfill its obligations. However, if the accrued benefits are less than the LSP, the employer can withdraw an amount equal to the accrued benefits as partial payment, but must pay the LSP shortfall in order to fulfill obligations.

Yes. MPF regulations require an employer to enroll his employee into an MPF scheme upon completion of 60 days of employment. It has nothing to do with the probationary period.

Yes. Although there is a maximum relevant income level for calculating mandatory contribution, both employers and employees are allowed to make contribution in excess of the mandatory contribution as required by the MPF legislation. Such additional contribution will be treated as voluntary contribution. Having said that an employer is not obliged to match the voluntary contribution made by its employees. Also, please be advised that there are rules under the MPF scheme in which you participate governing the vesting and withdrawal of your accrued benefits that are attributable to voluntary contribution made by you or on your behalf by your employer.

Personal Account

Your money will roll-over in the account, that is why it is commonly known as roll-over account. Due to larger pool of asset size, retaining and merging accrued benefits in one consolidated personal account may save you additional fees and charges.

Your future contributions from new employers will go into the new employer's MPF scheme instead of the personal account.

No. Your employer cannot withhold your benefits accrued from mandatory contributions. It will be vested fully as your accrued benefits once they are paid to your trustee. However, for voluntary contributions paid by your employers, forfeiture of benefits will be subject to the governing rules of your scheme.

Under the regulations, the trustee is restricted from imposing any fees or financial penalties for the transfer of accrued benefits from one registered scheme to another or from one account to another within the same scheme. (except in the case of expenses incurred as a result of funds redemption)

After receiving your transfer request, your new trustee will notify your previous trustee for the transfer of your accrued benefits. Your previous trustee is required to transfer your accrued benefits to the new trustee within 30 days after such notice. A transfer statement will be issued to you stating the particulars. The new trustee of your personal account will also send you a confirmation stating the amount received from your previous scheme.

Self employed

MPF regulations do not provide any exclusion for temporary or contract staff. However, if the employee is an expatriate who comes to work in Hong Kong for a period of less than 13 months, this person is excluded from the MPF coverage. Freelancers will be treated as self-employed persons and therefore required to join an MPF scheme.

If you are a salaried director, you are regarded as an employee. Both you and the company are required to contribute 5% of your monthly income (subject to a maximum of HK$3,000 in total) (with effect from 1 June 2014). If you are a sole proprietor or a partner in partnership business, you will be classified as a self-employed person and required to contribute 5% of your income.

The sole proprietor or partner in a partnership will be regarded as a self-employed person and is required to contribute to an MPF scheme for their own retirement benefits. If the sole proprietor or partner is earning less than HK$7,100 per month or HK$85,200 per year, no contribution is required. If the person is earning more than these amounts, they need to contribute 5% of their income to an MPF scheme as mandatory contributions, subject to a maximum of HK$1,500 per month or HK$18,000 per year (with effect from 1 June 2014).

The self-employed people are only required to contribute 5% of their relevant income from their own resources. However, they can also make additional voluntary contribution to the scheme.

You may choose to contribute on a monthly or yearly basis. If you choose to contribute on a yearly basis, you should pay your mandatory contributions to your scheme trustee by the end of each financial year of the scheme. If you choose to contribute on a monthly basis, you should specify to your scheme trustee a monthly date as your contribution day and make your monthly mandatory contributions by that date each month. You should inform your scheme trustee whether you want to contribute on a monthly or yearly basis when you first enroll in an MPF scheme. For the next financial year of the scheme, you should inform your scheme trustee of your choice (monthly or yearly) at least 30 days before the end of each financial year of the scheme. (Sources: MPFA Website)

You have to be enrolled in two MPF schemes. As a self-employed person, you have to enroll yourself in an MPF scheme. As an employee, your employer is required to enroll you in an MPF scheme and make mandatory contributions, when you have been employed under an employment contract for 60 days or more. (Sources: MPFA Website)

Employee

If your appointment as a company director is under a contract of employment and you receive remuneration as an employee, then you need to enroll in an MPF scheme. However, if you are a non-executive director who is not involved in the daily operations of the company, you are not required to enroll in an MPF scheme. (Sources: MPFA Website)

It depends on the employment period and the relevant income of your part-time jobs. If the employment period is more than 60 days, you are required to join the MPF scheme of respective employer. However, if your income is less than HK$7,100, you do not need to contribute but your employer does.

Yes. According to the MPF Schemes Ordinance, the MPF trustee must at least provide you with one fund switching per year. Hopefully, providers will allow for more frequent switches (for example, Principal intends to do so).

Your employer has the obligation to select an MPF scheme for you. You can present your views to your employer but the final decision on which MPF scheme to join rests on your employer.

After your employer has enrolled you in an MPF scheme, the trustee of the scheme is required to provide you with an acceptance notice within 30 days, and a membership certificate within 60 days. Click here for a sample of member certificate.

 

In addition, the MPFA will issue a participation certificate to your employer and he is required to have it displayed at the premises where you work.

You will receive from the trustee the following information:

 

  • a membership certificate stating the name of the scheme, the name and address of the approved trustee of the scheme, your name and the date of the certificate;
  • a document containing a general description of the scheme including the fees and charges payable under the scheme, particulars of the constituent funds in the scheme, name and contact details of the person to whom enquiries about contributions and related matters may be made; and
  • an annual benefit statement containing information about the contributions paid and investment returns for the year concerned.

If more than one constituent fund is offered by the MPF scheme, you may choose one or more of the funds in which to invest your contributions. Your scheme trustee is required to provide particulars of the funds within 60 days of your enrolment, such as their policy regarding the kinds of securities and other assets in which the individual constituent fund may invest, the investment managers involved, and so on.

 

You can make your own choice according to your investment objectives, personal circumstances and future plans. For example, a scheme member approaching retirement age may choose a lower risk investment product, while a younger member may choose to invest in a product with higher risks, but which may derive better investment returns.

Your scheme trustee is required by law to provide you with a choice to switch your investment portfolio at least once a year. Whether you can switch investments more than once during a year is subject to the governing rules of your scheme.

 

For Principal members, you can change your investment choices through the following channels.

 

  • "Principal TeleTouch®" at 2827 1233. Simply follow the instructions and key in your new investment direction.
  • Login to Principal Retirement Centre and send us your instruction for investment direction online.
  • Alternatively, you can send us the Change of Investment Choice by Member Form.

You can check your account balance through the following channels:

 

  • "Principal TeleTouch®" at 2827 1233.
  • Login to Principal Retirement Centre
  • We will also send you an annual benefit statement after the end of each scheme year, summarizing the contributions and investment activities of your retirement account.

If you change your job, you may opt for one of the following three ways to handle the accrued benefits in your MPF accounts:

 

  • Transfer the accrued benefits to another scheme your new employer participates in; or
  • Retain the accrued benefits in the same scheme (i.e. in a personal account in the same scheme); or
  • Transfer the accrued benefits to a personal account in another scheme (i.e. in another personal account). (Sources: MPFA Website)

You should fill in a scheme member's request for fund transfer form and then submit it to your new scheme trustee or your new employer. The form can be obtained from your trustee and downloaded from MPFA website.

No. Your MPF benefits can only be withdrawn under the following situations:

 

  • Attaining the retirement age of 65 years
  • Total incapacity
  • Terminal illness
  • Death
  • Permanent departure from Hong Kong
  • Meeting small balance provision (essentially less than HK$5,000)
  • Attaining 60 years of age and permanently ceasing the employment or self-employment

If you have attained the age of 65, you may present your identity card (or a copy of your identity card) and a completed Claim Form for Payment of Accrued Benefits to your scheme trustee to withdraw your accrued benefits. (Sources: MPFA Website)

Employer

As an employer, you will be responsible for the following:

 

Enrolment:

  • Ensure your employees become members of an MPF scheme

Contributions:

  • Calculate relevant income and contributions
  • Pay contributions not later than the 10th day of the following month after each contribution period end date
  • Notify the trustee of member termination of employment within 10 days after the last day of the calendar month in which the employee ceases employment
  • Assist employees in making voluntary contributions

Administration:

  • Notify the trustee of any changes of employer particulars or employee particulars within 30 days
  • Assist employees in completing the election form for the transfer of accrued benefits
  • Provide a remittance statement to the trustee detailing each contribution payment
  • Provide a monthly pay-record to employees showing relevant income, amount of contributions and contributions payment date
  • Keep records for employees
  • Keep the information required to be included in the remittance statement

Others:

  • Display an MPF participation certificate in the office

 

If the period during which your expatriate employees is given permission to land or remain in Hong Kong for employment purposes does not exceed 13 months, or if the expatriate employees are members of a provident, pension, retirement or superannuation scheme run in a jurisdiction outside Hong Kong, they are exempted from the MPF Schemes Ordinance and do not need to join an MPF scheme. (Source: MPFA Website)

Yes. No matter where they work, if they are employed by your Hong Kong company you will be responsible for providing them with an MPF scheme.

If you fail to pay the contributions on time, the trustee will inform the MPF Schemes Authority. You will then be liable to pay a contribution surcharge of 5% on the outstanding amount imposed. A financial penalty of HK$5,000 or 10% of contributions in arrears (whichever is greater) may also be imposed.

Under MPF, all accrued benefits derived from mandatory contributions must be preserved until the retirement age of 65 or certain withdrawal conditions are met. Voluntary contributions do not necessarily need to follow the MPF rules and therefore can be withdrawn upon termination of employment subject to the plan rules set out by the employer.

 

For MPF exempted ORSO schemes, the arrangement will be different. Existing members who join the scheme before the MPF implementation date can withdraw accrued benefits upon termination of employment. However, for new members who join after the MPF implementation date, they are subject to a "Minimum MPF Benefits" rule and only benefit amounts exceeding this level can be withdrawn upon termination of employment.

The company and the employee are not obliged to make MPF contributions after the employee attains the retirement age of 65. However, both the company and the employee can make voluntary contributions if they wish to.

Employers can enjoy tax exemption on their total mandatory and voluntary contributions subject to a maximum of 15% of the total emoluments of the employee(s). However, any voluntary contributions made by an employee are subject to Salaries Tax. Please note that employee mandatory contributions are not subject to Salaries Tax up to a maximum limit of HK$15,000 per year.

 

When an employee receives accrued benefits from an MPF scheme, the benefit amount is not usually subject to tax, except for any amount that is derived from the employer's voluntary contributions, to the extent that the amount exceeds the "Proportionate Benefits" as defined in the Inland Revenue Ordinance. Then, the excess portion is subject to tax.

 

"Proportionate Benefits" is defined as the number of completed months of service divided by 120, then multiplied by "Accrued Benefits". The accrued benefits for the purpose of this calculation will be the full amount of benefits derived from the employer's voluntary contributions. For example, if an employee worked for 4 years, the proportionate amount will be 40% (i.e. 48/120) of the accrued benefits.

After your application for membership of an MPF scheme is submitted, you will be given notice of acceptance within 30 days from the date on which you submit all the information required for the application, or from the date on which you agree to observe and accept the governing rules of the scheme, whichever is later.

 

Your scheme trustee will report your participation in the scheme to the MPFA. Upon receipt of such information, the MPFA will issue a participation certificate to you. If you are an employer, you are required to display this participation certificate at the premises where your employees were employed. If your employees do not perform work at your premises, you should display the certificate at your principal place of business. The displayed certificate may either be the original certificate or a certified copy issued by the MPFA.

An employer is bound by the Employment Ordinance to pay SP/LSP to an employee where applicable. After paying the SP/LSP, you can apply to your scheme trustee to withdraw the relevant amount from the accrued benefits derived from your mandatory contributions (and voluntary contributions, if any) to offset the SP/LSP. If no instruction is given by the employer, long service payment/severance payment will be offset by members voluntary contribution followed by Employers mandatory contribution.

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