If passed, the Mandatory Provident Fund Schemes (Amendment) Bill, gazetted on 27 June 2014, will introduce some fundamental new concepts into Hong Kong’s Mandatory Provident Fund system. In particular it will introduce a new circumstance in which benefits can be paid (terminal illness) and allow a new manner of payment of benefits (a phased withdrawal as opposed to the current lump sum withdrawal).

In addition the MPF Amendment Bill will make changes to the existing legislation to enable trustees of schemes to comply with the FATCA reporting obligations.

1. Changes to the circumstances in which MPF benefits can be paid

Currently MPF benefits are payable only in the following circumstances, when the member in question:

  • has reached age 65;
  • has reached age 60 and ceased work;
  • has died;
  • is permanently leaving Hong Kong; or
  • has become totally incapacitated.

Proposed change

It is proposed that an employee can take the full amount of his or her MPF benefits if he or she is diagnosed with a “terminal illness”. A “terminal illness” is an illness which is likely to reduce life expectancy to 12 months or less.


This change makes sense. It should not be unduly cumbersome to introduce.

2. Manner of payment of MPF benefits

Currently MPF benefits are always paid in the form of a single lump sum payment.

Proposed change

It is proposed that a member will be able to “phase” his or her withdrawal of MPF benefits, rather than being required to receive the lump sum in a single, one off, lump sum. Upon becoming entitled to benefits a member can make up to 12 withdrawals each year with no additional fees and no tax charge.


This enables individuals to avoid having to draw down their accrued benefits in one lump sum. The existing system mandates such form of payment. Hopefully this will be a precursor to some kind of genuine drive to introduce annuities into the Hong Kong market. In reality we recognise this will only happen with an overhaul of the current tax regime.

3. Disclosure provision

Currently the MPF legislation and Occupational Retirement Scheme Ordinance (ORSO) restrict the manner in which a trustee or scheme administrator can use personal data collected concerning members of the scheme. Such uses do not include the provision of such data to an overseas tax authority.

The Foreign Accounts Tax Compliance Act (FATCA) obliges trustees to make certain disclosures to the US Internal Revenue Service in certain circumstances.

Proposed change

Both the MPF and ORSO legislation will be changed to permit trustees to make FATCA (and “FATCA-type”) disclosures where necessary.


This change is an inevitable result of the staggeringly intrusive FATCA legislation.