Policy Address

Enhancing the Mandatory Provident Fund System

188. The Government proposes to progressively abolish the “offsetting” of severance payments (SP) or long service payments (LSP) with MPF contributions. The proposal contains three key elements. First, the abolition will have no retrospective effect. In other words, employers’ MPF contributions before the implementation date of the proposal will be “grandfathered”.

189. Second, as some SP and LSP functions overlap with those of the MPF system, we propose that the amount of SP or LSP payable for an employment period from the implementation date be adjusted downwards from the existing entitlement of twothirds of one month’s wages to half a month’s wages as compensation for each year of service. Third, the Government will share part of the expenses on SP or LSP of employers in the 10 years after the implementation date of the abolition to help employers, especially SMEs.

190. The above arrangement will only apply to employees covered by the Mandatory Provident Fund Schemes Ordinance or other statutory retirement schemes.

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