Mandatory provident fund
Encyclopedia
The Mandatory Provident Fund , often abbreviated as MPF (強積金), is a compulsory saving scheme (pension fund
) for the retirement
of residents in Hong Kong
. Most of employees and their employers are required to contribute monthly to mandatory provident fund schemes provided by approved private organisations, according to their salaries
and the period of employment
.
formed a safety net. Life expectancy
was comparatively low compared to today.
As Hong Kong become a developed entity, life expectancy in the territory improved greatly and the birth rate dropped significantly. Extended family
was broken into nuclear family
. Hong Kong's social security
system will be unable to cope with the large number of elderly people in the future. There were some calls to establish a central provident fund and heated debates among government, politicians and trade unions ensued in the 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:
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
) for the retirement
Retirement
Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions don't allow the person to...
of residents in Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
. Most of employees and their employers are required to contribute monthly to mandatory provident fund schemes provided by approved private organisations, according to their salaries
Salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis....
and the period of employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
.
History
In traditional Chinese society, a retired person was supposed to be supported by his family and his savings, thus an extended familyExtended family
The term extended family has several distinct meanings. In modern Western cultures dominated by nuclear family constructs, it has come to be used generically to refer to grandparents, uncles, aunts, and cousins, whether they live together within the same household or not. However, it may also refer...
formed a safety net. Life expectancy
Life expectancy
Life expectancy is the expected number of years of life remaining at a given age. It is denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience...
was comparatively low compared to today.
As Hong Kong become a developed entity, life expectancy in the territory improved greatly and the birth rate dropped significantly. Extended family
Extended family
The term extended family has several distinct meanings. In modern Western cultures dominated by nuclear family constructs, it has come to be used generically to refer to grandparents, uncles, aunts, and cousins, whether they live together within the same household or not. However, it may also refer...
was broken into nuclear family
Nuclear family
Nuclear family is a term used to define a family group consisting of a father and mother and their children. This is in contrast to the smaller single-parent family, and to the larger extended family. Nuclear families typically center on a married couple, but not always; the nuclear family may have...
. Hong Kong's social security
Social security
Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...
system will be unable to cope with the large number of elderly people in the future. There were some calls to establish a central provident fund and heated debates among government, politicians and trade unions ensued in the early 1990s.
In 1994, the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
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, taxTaxTo tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
-financed social safety netSocial safety netSocial safety nets, or "socioeconomic safety nets", are non-contributory transfer programs seeking to prevent the poor or those vulnerable to shocks and poverty from falling below a certain poverty level. Safety net programs can be provided by the public sector or by the private sector...
; - a mandatory, privately managed fully funded contribution scheme;
- voluntary personal savings and insuranceInsuranceIn law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
.