Mandatory provident fund

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Mandatory provident fund (Traditional Chinese: 強制性公積金), often abbreviated as MPF (強積金), is a compulsory saving scheme for the retirement of residents in Hong Kong. Most of employees and their employers are required to contribute monthly to mandatory provdent fund schemes provided by approved private origanisations, according to their salaries and the period of employment.

[edit] History

In traditional Chinese society, a retired person was supposed to be supported by his family and his saving. A large family formed a safety net. Life expectancy was comparatively low to that of present-day society. Retirement life was not aroused much concerns these days.

As Hong Kong become a developed entity, the life expectancy in the territory is improved greatly and birth rate drops significantly. Large families are broken into core families. The social security of Hong Kong is unable to cope with large number of elderly in the future. There were some voices from the society to establish central provident fund and hot debates between government, politicians and trade unions in early 1990s.

In 1994, the World Bank published the report "Averting the Old-Age Crisis: Policies to Protect the Old and Promote Growth", in which a three-pillar approach to protection for the aged was put forward.

The three pillars were: a publicly managed, tax-financed social safety net; a mandatory, privately managed, fully funded contribution scheme; and voluntary personal savings and insurance.

The MPF System in Hong Kong was designed to form the second pillar of this approach for retirement protection.