Hong Kong MPF vs ORSO: Which Should I Choose?

If you’re working in Hong Kong, understanding your pension options is crucial. The two retirement schemes available are the Mandatory Provident Fund (MPF) and the Occupational Retirement Schemes Ordinance (ORSO). Each has its own features, benefits, and regulations, so making an informed decision can help you secure a comfortable retirement.

Glass jar with coins and plant sprouting out of it.

What is MPF?

The Mandatory Provident Fund (MPF) is a government-regulated retirement plan that is mandatory for most employers and employees in Hong Kong. Here are some key points:

Compulsory Participation: All employees aged 18 to 64 who are employed for more than 60 days must participate in the MPF scheme. Both employers and employees contribute 5% of the employee's income, up to a certain cap.
Government Governed: The MPF is overseen by the Mandatory Provident Fund Schemes Authority (MPFA), ensuring compliance with regulations.
Standardized Plans: MPF schemes offer standardized investment options, with contributions invested in approved funds.
Withdrawal Terms: Funds are generally locked in until the retirement age of 65, with limited exceptions for early withdrawal.

What is ORSO?

The Occupational Retirement Schemes Ordinance (ORSO) schemes are employer-driven retirement plans that offer more flexibility and customization. Here are some key points:

Voluntary Participation: ORSO schemes are voluntary for both employers and employees. Employers have the flexibility to design customized retirement plans.
Employer-Driven: Participation is initiated by the employer, and the terms of the scheme can vary widely between companies.
Customizable Plans: Employers can tailor ORSO schemes to meet their specific needs, including contribution arrangements and investment options.
Withdrawal Terms: ORSO schemes allow for more flexible withdrawal options, depending on the company's rules.

Why I would Choose ORSO over MPF

If it’s not already obvious based on the comparison above, ORSO has multiple key advantages over MPF with Flexibility being the most significant factor.

Unlike the standardized MPF plans, ORSO schemes are employer-driven and can be tailored to meet the specific needs of both the employer and the employees. This means that contribution arrangements, investment options, and withdrawal terms can be customized to suit your financial goals and preferences.

With ORSO schemes, employers have the ability to choose from a wider range of investment options, including more diverse and potentially higher-yielding assets. This can lead to better investment performance and higher returns on your retirement savings. Employers can also work with professional fund managers to optimize the investment strategy and maximize growth.

ORSO schemes often provide more generous benefits compared to MPF schemes. Since employers have the flexibility to design their own retirement plans, they can offer higher contribution rates, additional bonuses, and other attractive benefits that are not typically available under MPF schemes. This can result in a more substantial retirement fund over time.

Another significant advantage of ORSO schemes is the flexibility in withdrawal options. While MPF funds are generally locked in until the retirement age of 65, ORSO schemes may allow for more flexible withdrawal terms, depending on the company's rules. This can provide you with greater control over your retirement savings and the ability to access funds when needed.

Key Things to Remember when Choosing your Pension Plan

When joining a new company, it’s absolutely crucial that you make an informed decision about choosing MPF or ORSO early on.

This is because your employer must enroll you in a scheme within the first 60 days of your employment. If you do not notify your employer in writing within the first 30 days of employment, you will be deemed to have chosen to join an MPF scheme.

Can I Switch between Plans once I’ve made a Choice?

If you initially choose to join an MPF scheme, you generally cannot switch to an ORSO scheme later. The choice between an MPF scheme and an MPF-exempted ORSO scheme is typically a one-time decision made within the first 30 days of your employment, which is why it’s absolutely crucial you make the right choice!

What Will Happen to My Old MPF Account if I Choose ORSO with my New Employer?

After leaving a job, if you do nothing with your existing MPF contribution account for three months, your MPF assets will be rolled over to an MPF personal account by the same MPF scheme provider. You will continue to receive annual benefit statements from it even when no new contributions are made. If you start a new job and enroll in the new MPF scheme, you’ll have a new MPF account. As a result, it is common for employees in Hong Kong to have more than one MPF personal account.

You cannot directly transfer your MPF contributions to an ORSO scheme. When you leave your current employment, your MPF benefits will remain in your MPF account, and you can continue to manage them separately. Those contributions will be waiting for you until they become eligible for withdrawal.

To Summarize: Hong Kong MPF vs ORSO

While both schemes have their own merits, when comparing MPF vs ORSO the flexibility, enhanced benefits, and potential for higher returns make ORSO an attractive option for many employees. By choosing an ORSO scheme, you can enjoy a retirement plan that is tailored to your needs, provides generous benefits, and offers greater control over your financial future. If your employer offers an ORSO scheme, it may be well worth considering as part of your retirement strategy.