Which Provident Fund - Help!

[Jaguar7777]

Hi All,

Im looking for some sage advice on which is the better fund to select as it appears there is no chance to change your mind later. Its either the Mandatory Provident Fund or the Cathay Fund. The info is fairly light in the package i have.

Any info, impressions and experience would be most appreciated, hopefully to avoid losing a lot of money later...

J.

[Team America]

This website is updated every couple of months.

http://www.bridge-water.com/en/section/hkaoa/fchoice.htm

Just a suggestion.

[Numero Crunchero]

Firstly I assume you are talking about joining CX and you are trying to choose between Mandatory Provident Fund and the CX sponsored Fidelity Provident Fund.

Not giving financial advice as to what to invest in....but...


PF has lots of choices in terms of different country funds/cash funds etc. MPF I think has a much more limited range...I think only 3 or so...like balanced/growth/conservative etc.

PF can be accessed any time you leave for a basing(you pay HKG tax on the unvested portion...if you have say $100K in the PF, and you have done 4 years, 40% of the PF will come untaxed and you will receive the other 60% taxed at HKG rate..currently 16%). At the moment normal retirement age is 55...so if you stayed employed in HKG until then you will then be able to leave HKG with 100% of your PF.
MPF is a concept meant for local citizens of HKG rather than for expats. You can only get it at age 60 or earlier if you leave HKG permanently. It would be difficult to prove you have left permanently if you go on a base.

The returns of either scheme will depend on asset classes chosen.

You can change where the monthly PF contributions go on a monthly basis, as well as moving past contributions. EG if you decided you had a good run with equities and wanted to switch into cash you can choose one of the many currency cash funds.

If it was me...I would choose PF...but as they say, seek your own guidance...blah blah blah

[Ibanez]

Please correct me if I'm wrong (I also need to make this decision in the near future), but employer contribution is 15.5% of salary for PF and only 5% of salary (where salary is limited to $20 000 per month) for MPF. Employee contribution is voluntary 5% or 10% of salary for PF, and 5% of salary (again, where salary is limited to $20 000 per month) for MPF. Bearing that in mind, the decision should not be too difficult, or am I smoking my socks again? :zzz:

[Numero Crunchero]

Ibanez
Let me start by saying it is unlikely that the amount CX provides will change whichever scheme you choose. I am in MPF - I was a permanent HKG resident when it was introduced so kinda had to. CX puts in $1K for me and $1K from its 15.5% PF contribution...the rest I get as cash in my salary(and unfortunately taxed as salary).
I really can't answer your specific question other than to say I think PF is a lot more flexible in terms of what you invest in and how you get your money back. I firmly believe that CX will still end up paying you 15.5% somehow or another...whether it be MPF+salary or just MPF or just PF.

Also...not supposed to give advice, but if you are reasonable with money don't volunteer of any of your own money as that 5/10% could be used to pay off mortgages somewhere else. If you have no idea or no self discipline, then adding your personal 5/10% is a good idea.

[Ibanez]

OK - understand. The $1k that you receive is the 5% capped at $20 000 and the rest you receive in cash (unfortunately taxed). Thank you. Investment option wise, the PF gives you over 40 options, whereas the MPF has 9 funds. BTW - I agree with you on the employee contribution side of things. Thanks again for the info.

[Jaguar7777]

Thanks all

the CX PF seemed on paper to be the better, but just wanted some first hand info too.

J.

[Five Green]

Are they still limiting the payout to 10% per year of service ?

That was a factor when I joined and why I opted for the cash instead of any P fund. That and the fact that everything was a "scheme"!

At the time the company would only pay you 10% per year. ie quit/leave after 5 years get 50% of your P fund.

Soo since I couldn't see myself here after ten years I took the cash. Now look almost made it !!

FG

[Numero Crunchero]

FG,
did you get the option to take cash when you joined? Did you join in HKG or on a base? I thought only people who are on or were on a base could get the 15.5% as cash! Thats how i get mine as cash now.

If you are in the PF and want to resign after say 5 years, you would only be entitled to50% of the PF...the vested portion. If, on the other hand, you decided to take a basing after 5 years and then resigned a month later, you would have received 50% PF fully vested and the other 50% unvested, which means you have to pay HKG tax on the unvested 50%, so you would end up with 92% or so of your PF if you took a base first!

[EngineOut]

G'day all,

I'm just going through this process now (of choosing), no where in the [limited] information that I have does it state that you still receive 15.5% for the MPF, and that you would receive the rest as cash, it just says employer contributes 5% (limited to 20K), and employee must contribute 5%.

Can any recent joiner confirm that you receive the 15.5% with the MPF still, with the difference in cash if you sign up for the MPF? Otherwise it seems a no-brainer to go with the CX PF.


Thanks:confused:

[Knightpilot]

Wanted to revive this thread as I am entering DESO and am confused by the choice. I would like it in cash if an option to avoid the vestment period, but only seem to have P-fund or MPV to choose from. Suggestions welcome. If I can't get it in cash why would I even consider MPV?

[Busbert]

Definitely, without a doubt, the CPA PF is better than the MPF.

Cathay is obliged to give you the option when you join, and are no supposed to direct you one way or another, but honestly it is a no brainer

[Glass Half Empty]

If you opt to take the cash on joining, do you have an option to rejoin later into the PF?

[Pogie]

Yes, if you take the cash option to start, you can always join the PF later. Once you join, then you're in it until you quit, retire, or take a base.