Mandatory Provident Fund Quiz 07

Correct: Statements I, II, and IV are consistent with the MPFA Guidelines on Conduct Requirements. Registered intermediaries are permitted to offer incentives if they take the form of a discount on the intermediary’s own fees (I) or a discount of scheme fees and charges provided via bonus units or credits to the client’s MPF account (II). Furthermore, intermediaries have a professional obligation to cooperate with the MPFA and frontline regulators at all times, particularly when establishing facts during a complaint investigation involving themselves or their subsidiary intermediaries (IV).

**Incorrect:** Statement III is incorrect because the Guidelines explicitly prohibit registered intermediaries from offering any rebates, gifts, or incentives (monetary or non-monetary) for the purpose of encouraging a client to retain membership in a registered scheme or constituent fund until a certain date or for a specific period. Offering a cash bonus for a three-year commitment is a direct violation of these conduct standards.

**Takeaway:** While the MPF conduct framework generally prohibits incentives to prevent biased advice, specific exceptions exist for fee-related discounts that benefit the client’s MPF account directly or reduce the intermediary’s own charges. Intermediaries must also prioritize regulatory cooperation and avoid any practices that use incentives to influence a client’s decision to stay in a particular scheme. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III are accurate according to the Mandatory Provident Fund Schemes Ordinance. Regular employees (non-casual) benefit from a “contribution holiday” for their own portions during the first 30 days of employment and the following incomplete wage period. For regular employees earning below the minimum relevant income level of HK$7,100 (such as HK$6,800), the employee is exempt from contributions, but the employer must still contribute 5% of the relevant income. Casual employees in Industry Schemes are distinct as they must begin making mandatory contributions from their very first day of employment without any contribution holiday.

**Incorrect:** Statement IV is incorrect because mandatory contributions for both employers and employees are subject to a statutory cap. For casual employees under an Industry Scheme, the maximum daily mandatory contribution is capped at HK$50 for any daily relevant income of HK$950 or more. Therefore, an income of HK$1,200 would result in a HK$50 contribution, not HK$60.

**Takeaway:** It is crucial to distinguish between regular and casual employees regarding the commencement of contributions and to remember that while employees may be exempt from contributions below the minimum income threshold, employers are generally required to contribute 5% regardless of the minimum threshold (provided the employee is not in a contribution holiday). Therefore, statements I, II and III are correct.

The Mandatory Provident Fund (MPF) system in Hong Kong was specifically designed to align with the second pillar of the World Bank’s retirement protection framework. This pillar is defined as a mandatory, privately-managed, and fully-funded contribution system. It is employment-based, meaning it relies on contributions from employers, employees, and self-employed persons to accumulate individual retirement capital, thereby shifting some of the retirement protection responsibility from the state to the individual and the private sector. Publicly-managed social safety nets that provide a universal or means-tested minimum pension are classified under the first pillar (or pillar zero in the expanded five-pillar model), which is intended to prevent poverty rather than provide earnings-related retirement income. Voluntary savings and insurance products constitute the third pillar, which is driven by individual choice rather than legal mandate. Non-contributory systems funded by general taxation are distinct from the MPF, as the MPF requires active contributions based on relevant income from employment.

**Takeaway:** The MPF system serves as the second pillar of Hong Kong’s retirement framework, characterized by its mandatory nature, private-sector management, and the requirement that it be fully funded by employment-related contributions.

Correct: Under the Inland Revenue Ordinance in Hong Kong, accrued benefits that are derived from mandatory contributions are exempt from salaries tax when they are paid out to the scheme member. For employers, the contributions made to an MPF scheme for their employees are tax-deductible as business expenses, provided they do not exceed 15% of the total emoluments of each employee. Furthermore, employees are entitled to a tax deduction for their own mandatory contributions, which is capped at a statutory maximum limit for each year of assessment (currently $18,000). These rules ensure that the mandatory portion of the retirement system is supported by fiscal incentives.

**Incorrect:** Voluntary contributions made by employees are generally not eligible for tax deductions, with the exception of Tax Deductible Voluntary Contributions (TVC) which are subject to a specific aggregate limit shared with qualifying annuity premiums. Therefore, a blanket statement that all voluntary contributions are deductible without a ceiling is false. Additionally, while mandatory contributions are deductible and benefits are tax-exempt, these benefits do not apply to all types of contributions or without specific percentage or dollar-value caps.

**Takeaway:** The MPF tax framework provides specific relief for mandatory participation: benefits from mandatory contributions are tax-free, employer deductions are capped at 15% of emoluments, and employee mandatory deductions are subject to a fixed annual limit, leading to the combination (i), (ii), and (iii) only.

Correct: Statement I is correct because the standard financial requirement for a registered trust company acting as an MPF custodian is a paid-up share capital and net assets of at least HK$150 million each (which may be lowered to HK$50 million if other MPFSO requirements are satisfied). Statement III is correct as Master Trust Schemes are specifically designed to pool contributions from various employers and individuals to achieve administrative and investment efficiencies. Statement IV is correct because the 60-day employment rule does not apply to casual employees in the construction and catering industries; they are covered by MPF requirements regardless of the duration of their employment.

**Incorrect:** Statement II is incorrect because participation in an Industry Scheme is optional for employers in the construction and catering sectors. While these schemes are tailored for these industries to facilitate the portability of benefits for mobile workers, employers are free to enroll their employees in a Master Trust Scheme instead.

**Takeaway:** MPF custodians must maintain high financial standards to protect scheme assets, and while Industry Schemes provide specific benefits for high-mobility sectors like construction, their use is discretionary for employers, and they operate under different enrollment timelines for casual staff compared to standard schemes. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and IV represent core ongoing requirements for MPF-exempted ORSO schemes under the MPF Schemes (Exemption) Regulation. Employers must provide new eligible employees with a one-time choice between the exempted ORSO scheme and an MPF scheme to ensure they have a say in their retirement protection. Furthermore, to safeguard the scheme’s assets from the employer’s specific business risks, employer-related investments are strictly capped at 10% of the scheme’s total assets. For defined benefit (DB) schemes, an actuarial certificate is required at least once every three years to verify that the scheme is sufficiently funded to meet its future liabilities.

**Incorrect:** Statement III is incorrect because the statutory deadline for the trustee to submit the annual return and the auditor’s report to the Mandatory Provident Fund Schemes Authority (MPFA) is within four months after the end of the scheme’s financial year, not one month. A one-month period would be insufficient for the completion of a formal audit and the preparation of the necessary regulatory filings.

**Takeaway:** Maintaining the MPF exemption status for an ORSO scheme requires continuous compliance with disclosure rules, investment restrictions, and periodic reporting, including the triennial actuarial review for defined benefit plans. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III are accurate according to the Mandatory Provident Fund Schemes Ordinance and related regulations. Employers have the right to offset Long Service Payments (LSP) or Severance Payments (SP) against the accrued benefits derived specifically from the employer’s contributions (both mandatory and voluntary). If the accrued benefits from the employer’s side are insufficient to cover the full statutory payment, the employer must settle the remaining balance out of their own pocket. Furthermore, the ‘6+6’ rule for unclaimed benefits dictates that if a cheque is not presented within the 6-month ‘Specified Period’ and the trustee fails to locate the member in the subsequent 6 months, the benefits are then classified as unclaimed.

**Incorrect:** Statement IV is incorrect because unclaimed benefits retained in an MPF scheme continue to vest in the scheme member. They do not cease to belong to the member, nor are they transferred to the MPFA as revenue. The MPFA merely maintains a centralized register to help members identify where their unclaimed benefits are being held by trustees.

**Takeaway:** While employers can utilize their contribution portion to offset statutory termination payments, the underlying principle of MPF is that benefits (even if unclaimed) remain the property of the member and continue to vest in them. Therefore, statements I, II and III are correct.

Correct: Statements I, II, and III are accurate. Bond prices typically move in the opposite direction to interest rates, meaning they rise when market rates decline because their fixed coupon becomes more attractive. Derivatives are financial instruments used for hedging to offset potential losses in an underlying investment. Additionally, while most bonds are redeemed at maturity, perpetual bonds are unique debt instruments that do not have a fixed maturity date.

**Incorrect:** Statement IV is incorrect because it reverses the relationship between the two vehicles. Mutual funds and unit trusts are essentially the same from an investment perspective as they both pool investor funds for professional management, but they are distinguished by their legal structures, with one being a corporate entity and the other established under a trust deed.

**Takeaway:** MPF intermediaries must understand the specific characteristics of asset classes, such as the inverse price-interest rate relationship of bonds and the structural differences between pooled investment vehicles. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statement I is accurate as it describes the Employee Choice Arrangement (ECA), which permits employees to transfer their portion of mandatory contributions from the employer-selected scheme to a scheme of their own choosing at least once per calendar year. Statement III is also correct because the Code on Disclosure for MPF Investment Funds mandates that the Fund Fact Sheet (FFS) must include specific data points, including the net asset value, the top ten asset holdings, and the Fund Expense Ratio (FER).

**Incorrect:** Statement II is incorrect because MPF regulations strictly prohibit the charging of fees or financial penalties for switching or transferring accrued benefits, except for necessary transaction costs paid to third parties. Statement IV is incorrect because the Code on Disclosure specifically exempts MPF Conservative Funds, certain guaranteed funds, and newly launched funds from the requirement to provide an On-going Cost Illustration (OCI), though MPF Conservative Funds require a different illustrative example.

**Takeaway:** MPF scheme members have the right to transfer employee mandatory contributions annually under the ECA without incurring trustee fees, and they must be provided with Fund Fact Sheets containing standardized performance and cost data to facilitate informed decision-making. I & III only. Therefore, statements I and III are correct.

Correct: Statements I, II, and III are correct. Section 107 of the Securities and Futures Ordinance (SFO) stipulates that inducing others to participate in an MPF scheme or invest in pooled investment funds through fraudulent or reckless misrepresentations is a criminal offence. The statutory maximum penalty for this breach is a fine of HK$1,000,000 and 7 years of imprisonment. Additionally, the Guidelines on Conduct Requirements for Registered Intermediaries require intermediaries to have a comprehensive understanding of the schemes they promote, including fees, investment policies, and risk levels.

**Incorrect:** Statement IV is incorrect because the registration requirements specify that a subsidiary intermediary must be a Type B regulatee (an individual). A Type A regulatee refers to a principal intermediary, which is typically a business entity such as a bank or insurance company.

**Takeaway:** MPF intermediaries are subject to strict statutory penalties under the SFO for misrepresentation and must maintain high standards of product knowledge and proper registration status (Type B for individuals) to ensure investor protection. Therefore, statements I, II and III are correct.

Correct: Statement I is correct as the Mandatory Provident Fund Schemes Authority (MPFA) has the power to impose a pecuniary penalty not exceeding HK$10,000,000 or three times the profit gained or loss avoided, whichever is greater, for non-compliance with performance requirements or following a conviction. Statement II is also correct; under the Mandatory Provident Fund Schemes Ordinance (MPFSO), an officer of a company who, with intent to defraud, causes the company to fail to comply with an investigation requirement faces a maximum penalty of a HK$1,000,000 fine and 7 years imprisonment upon conviction on indictment.

**Incorrect:** Statement III is incorrect because the MPFA’s power to issue a public or private reprimand is not limited to cases of criminal conviction; it can also be exercised if the MPFA is satisfied that a regulated person has failed to comply with a performance requirement. Statement IV is incorrect because the maximum imprisonment term for providing false or misleading information recklessly or knowingly (without the specific proven intent to defraud) is 2 years on conviction on indictment, whereas the 7-year term is reserved for cases involving a specific intent to defraud.

**Takeaway:** Regulated persons in the MPF industry must distinguish between different levels of statutory offences; while general non-compliance carries significant penalties, actions involving an ‘intent to defraud’ trigger the most severe criminal sanctions, including up to 7 years of imprisonment. Therefore, statements I and II are correct.

Correct: Statement I is accurate because the ‘Small Balance’ ground for early withdrawal requires that the member’s balance in the specific MPF scheme does not exceed $5,000, and at least 12 months have passed since the last contribution day of the latest contribution period. Statement IV is also correct as it reflects the statutory timeline for trustees to process and pay out accrued benefits, which is the later of 30 days after the claim is lodged or 30 days after the last contribution day.

**Incorrect:** Statement II is incorrect because the medical certificate for a terminal illness claim must state that the member’s life expectancy is likely to be reduced to 12 months or less, not 24 months. Statement III is incorrect because the Mandatory Provident Fund Schemes Ordinance specifies that the ground of permanent departure from Hong Kong can only be used once in a scheme member’s lifetime; any subsequent departures would not qualify for early withdrawal under this specific ground.

**Takeaway:** MPF intermediaries must ensure clients understand the specific criteria for early withdrawal, including the ‘once in a lifetime’ restriction for permanent departure and the 12-month life expectancy threshold for terminal illness, as well as the trustee’s 30-day payment obligation. Therefore, statements I and IV are correct.

Correct: Statements I, III, and IV accurately reflect the conduct requirements for MPF registered intermediaries. According to the Guidelines, intermediaries must ensure that any cheques received are crossed and made payable only to the approved trustee or the registered scheme (III.56). Furthermore, principal intermediaries are mandated to maintain records of regulated activities, including advice given and client acknowledgments, for a minimum period of seven years (III.57, III.58). When discussing fees, intermediaries are expected to provide comprehensive disclosure by referring clients to the fund expense ratio (FER) and ongoing cost illustrations (III.52).

**Incorrect:** Statement II is incorrect because the Guidelines explicitly state that a registered intermediary must not receive cash payments from clients under any circumstances (III.56). There is no exemption based on the amount or the purpose of the payment, such as administrative fees.

**Takeaway:** Registered intermediaries must strictly observe the prohibition on handling cash, ensure proper cheque procedures, maintain robust records for seven years, and provide transparent fee disclosures to protect client interests. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and III are accurate reflections of the statutory conduct requirements under Section 34ZL of the Mandatory Provident Fund Schemes Ordinance (MPFSO). Registered intermediaries are legally required to act honestly, fairly, and in the best interests of their clients (34ZL(1)(a)). They must also meet the ‘prudent person’ standard, exercising a level of care, skill, and diligence that is reasonably expected of a professional in their field (34ZL(1)(b)). Furthermore, the responsibility for systemic compliance lies with the principal intermediary, which must establish and maintain internal controls to ensure its subsidiary intermediaries adhere to these conduct standards (34ZL(3)(a)).

**Incorrect:** Statement IV is incorrect because Section 34ZL(1)(a) mandates that intermediaries must always act in the best interests of the client. While Section 34ZL(1)(f) requires the disclosure of conflicts of interest that cannot be avoided, this disclosure does not permit the intermediary to prioritize their own financial gain or the principal intermediary’s interests over the client’s interests. The duty to act in the client’s best interest remains the primary obligation.

**Takeaway:** The MPF conduct framework establishes a high standard of professional behavior, requiring both individual accountability for subsidiary intermediaries and institutional oversight from principal intermediaries to protect scheme members. I, II & III only. Therefore, statements I, II and III are correct.

Correct: According to the Mandatory Provident Fund Schemes (General) Regulation, if an employer fails to pay the mandatory contributions by the contribution day, the approved trustee has a statutory duty to report the default to the Mandatory Provident Fund Schemes Authority (MPFA) within 10 days after the contribution day. Once the MPFA receives this report, it may take recovery action, which includes issuing a notice to the employer to pay the arrears and a contribution surcharge, which is fixed at a flat rate of 5% of the amount in arrears.

**Incorrect:** The reporting requirement for the trustee is 10 days, not 30 days or 60 days. The surcharge is a flat 5%, not 10% or 15%. Furthermore, while the MPFA can impose a financial penalty, it is calculated as the higher of $5,000 or 10% of the arrears, rather than being a fixed $50,000 penalty payable directly to the trustee. Revocation of business registration is not a standard administrative penalty under the MPFSO for a simple contribution default.

**Takeaway:** Approved trustees must act as gatekeepers by reporting contribution defaults to the MPFA within a strict 10-day window, triggering a 5% surcharge and potential further financial penalties for the defaulting employer.

Correct: Statements I, III, and IV accurately reflect the requirements under the MPFA Guidelines. A principal intermediary is required to report any non-compliance with the MPFSO or Guidelines to the frontline regulator within 14 working days of identifying the failure. For serious complaints, such as those involving the unauthorized transfer of accrued benefits or criminal activities, the intermediary must notify the frontline regulator and the industry regulator immediately. Additionally, to mitigate the risk of fraud, internal controls must prevent subsidiary intermediaries from accepting cash or cheques that are not crossed and made payable to the approved trustee or the registered scheme.

**Incorrect:** Statement II is incorrect because the MPFA Guidelines specify that all audio and written records, as well as information regarding the conduct of regulated activities, must be retained for a minimum period of seven years, rather than five years.

**Takeaway:** Principal intermediaries must adhere to strict record-keeping durations (seven years) and specific reporting timelines for both general regulatory breaches (14 working days) and serious client complaints (immediately). Therefore, statements I, III and IV are correct.

Correct: According to Section 34W of the Mandatory Provident Fund Schemes Ordinance (MPFSO), for an individual to be approved as a responsible officer, they must be a subsidiary intermediary already attached to the principal intermediary. The individual must also be granted sufficient authority and provided with the necessary resources and support within the firm to carry out their supervisory responsibilities. Additionally, the applicant must not have had a previous approval as a responsible officer revoked by the MPFA within the one year immediately preceding the date of the current application.

**Incorrect:** The requirement for a clean regulatory record regarding previous revocations is specifically set at one year; therefore, any suggestion that this period is longer or shorter is inaccurate. While being a regulatee of an industry regulator is a condition for becoming a subsidiary intermediary, the specific designation of ‘Type A’ or ‘Type B’ is not a standalone requirement for the approval of a responsible officer under Section 34W, as the primary requirement is the existing attachment as a subsidiary intermediary. General industry experience, while practically important, is not one of the statutory criteria listed for the MPFA’s approval process in this specific section.

**Takeaway:** To be approved as a responsible officer, an individual must be an attached subsidiary intermediary, possess internal authority and resources, and have no RO-related revocations within the past 12 months. The correct combination of requirements is I, II, and III only.

Correct: The Annual Benefit Statement (ABS) is a historical record that reflects the status of a member’s account at the end of a specific financial period. According to the Disclosure Code, trustees are mandated to issue the ABS to members within three months after the end of the scheme’s financial period. It contains vital information such as contribution history, transfers, account balances, the extent of vesting, and the investment gains or losses incurred during that period.

**Incorrect:** It is incorrect to suggest a six-month window for issuance, as the statutory limit is three months. The ABS is not a forward-looking document and therefore does not include future performance projections. Furthermore, the ABS is not a real-time valuation tool; it is a snapshot of a past period. The two-year exemption mentioned in some contexts applies specifically to the disclosure of the Fund Expense Ratio (FER) for newly established funds, not to the issuance of the ABS to members.

**Takeaway:** The ABS serves as a primary tool for MPF members to monitor their account activity and must be delivered within a strict three-month timeframe following the close of the scheme’s financial year.

Correct: According to the Mandatory Provident Fund Schemes Ordinance (MPFSO), the process for handling a subsidiary intermediary who fails to meet continuing training requirements involves several stages. If the individual fails to comply with a written notice to complete the training within a specified period (typically 30 days), the MPFA may suspend their registration. If the individual remains non-compliant for a further 30 days after the suspension has taken effect, the MPFA then has the statutory authority to revoke the individual’s registration as a subsidiary intermediary.

**Incorrect:** Frontline Regulators (FRs) such as the HKMA or SFC are responsible for the supervision and investigation of intermediaries, but they do not possess the power to impose disciplinary sanctions; the MPFA is the sole authority for such actions. Immediate revocation upon the first day of suspension is not permitted, as the law provides a specific 30-day window for the individual to rectify the training deficiency before the registration is permanently cancelled. Furthermore, there is no provision for an automatic referral to other regulators for a 60-day retraining period as a standard statutory consequence for failing to comply with a training notice.

**Takeaway:** The disciplinary ladder for non-compliance with continuing training requirements follows a specific sequence: a written warning notice, followed by suspension of registration, and finally revocation if the requirement is not met within 30 days of the suspension starting.

Correct: Statements I, II, and IV are accurate descriptions of the MPF regulatory framework. The Mandatory Provident Fund Schemes (Fees) Regulation explicitly lists the fees for intermediary registration and the approval of responsible officers. The Mandatory Provident Fund Schemes (General) Regulation provides the comprehensive operational rules for the system, including how accrued benefits are ported or withdrawn. Additionally, the MPFA issues specific codes, such as the Code on Disclosure for MPF Investment Funds, to ensure that service providers maintain high standards of transparency.

**Incorrect:** Statement III is incorrect because the Mandatory Provident Fund Schemes (Exemption) Regulation is specifically designed to handle the exemption of Occupational Retirement Schemes Ordinance (ORSO) schemes from MPF requirements. The exemption of specific classes of persons, such as domestic helpers or people from overseas who are in Hong Kong for short periods, is governed by the primary Mandatory Provident Fund Schemes Ordinance (MPFSO) and its schedules, not the Exemption Regulation.

**Takeaway:** Distinguishing between the specific purposes of the various MPF regulations is crucial; the General Regulation focuses on operations, the Fees Regulation on administrative costs, and the Exemption Regulation on ORSO-related matters. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: Substitute workers in the catering and construction industries are specifically identified as being covered by the MPF System. They are generally treated as casual employees, even if they are only performing another person’s job for a few days and are paid directly in cash by that person for their services. This ensures that short-term labor in these specific high-turnover industries remains protected under the retirement scheme.

**Incorrect:** The method of payment (cash) or the fact that the payment comes from a colleague rather than the business owner does not exempt the worker from MPF coverage. While regular employees in other industries must be employed for at least 60 days to be covered, this threshold does not apply to casual employees in the catering and construction sectors, who are covered from their first day of work. Furthermore, these workers are not classified as self-employed because they are performing duties as part of the establishment’s workforce rather than running their own business.

**Takeaway:** Under MPF regulations, substitute workers in the catering and construction industries are regarded as casual employees and are subject to mandatory contribution requirements regardless of the short duration of their service.

Correct: Statements I, II, and IV accurately reflect the requirements under the Mandatory Provident Fund Schemes Ordinance (MPFSO). For an individual to be approved as a Responsible Officer (RO), they must be a subsidiary intermediary attached to the principal intermediary and possess sufficient authority and resources within the organization to fulfill their duties. Additionally, the MPFA is required to assign the same industry regulator that oversees the principal intermediary as the frontline regulator for the RO.

**Incorrect:** Statement III is incorrect because the statutory period regarding the revocation of a previous RO approval is one year immediately preceding the application date, not three years. While the MPFA also considers whether an individual is currently disqualified, the specific time-bound restriction for prior revocations under section 34W(1) is 12 months.

**Takeaway:** Approval for a Responsible Officer depends on their existing attachment as a subsidiary intermediary, their internal seniority/resources, and a clean regulatory record regarding RO revocations for at least one year, with their frontline regulator always mirroring that of their principal intermediary. Therefore, statements I, II and IV are correct.

Correct: The Mandatory Provident Fund (MPF) system in Hong Kong was established following the World Bank’s 1994 recommendation of a three-pillar retirement protection framework. It is specifically categorized as Pillar Two because it is a mandatory, privately-managed, and fully-funded contribution system. This design ensures that the responsibility for retirement savings is shared between employers and employees, while the funds are managed by private-sector professionals rather than the government.

**Incorrect:** Pillar Zero is incorrect because it refers to non-contributory, publicly-financed social safety nets that provide a minimal level of protection, such as social security allowances. Pillar One is incorrect because it describes publicly-managed and publicly-financed mandatory schemes, which often operate on a pay-as-you-go basis rather than being fully funded. Pillar Three is incorrect because it represents voluntary personal savings and private insurance that individuals choose to maintain in addition to mandatory schemes.

**Takeaway:** The MPF system serves as the second pillar of the World Bank’s framework, providing a privately-managed and employment-based mandatory savings structure to address the challenges of an ageing population.

Correct: The Mandatory Provident Fund (MPF) system is classified as Pillar Two because it is a mandatory, privately-managed, and fully-funded contribution system. Voluntary savings, such as personal savings, insurance, or voluntary contributions to a retirement scheme, are categorized as Pillar Three. Pillar Four includes informal support such as family assistance, as well as individual assets like home ownership and other social programs like healthcare.

**Incorrect:** Pillar Zero refers to non-contributory, publicly-financed systems like social security allowances. Pillar One refers to mandatory, contributory systems that are publicly managed. It is incorrect to classify the MPF as Pillar One because it is managed by private trustees. It is also incorrect to classify home ownership or family support as Pillar Three, as these fall under the broader scope of Pillar Four.

**Takeaway:** In the World Bank’s five-pillar framework, the MPF system serves as Pillar Two, which is designed to complement voluntary savings (Pillar Three) and informal support or individual assets (Pillar Four) to ensure retirement income security.

Correct: According to the Mandatory Provident Fund Schemes Ordinance, if a relevant employee (other than a casual employee) ceases employment and fails to provide a transfer election within three months after the trustee receives the termination notice, the employee is deemed to have elected to transfer their accrued benefits to a personal account within the same scheme. This default mechanism ensures that the assets remain invested and managed within the MPF system even in the absence of specific instructions from the member.

**Incorrect:** Accrued benefits are not liquidated into cash or sent via cheque to the member’s last known address, as MPF benefits must generally be preserved until retirement. There is no provision for transferring funds to a central reserve fund managed by the MPFA for safekeeping. Additionally, the employer is not permitted to retain these funds in the company’s contribution account; once the employment relationship ends and final contributions are made, the management of the accrued benefits becomes a matter between the member and the trustee.

**Takeaway:** If an employee fails to make a transfer election within three months of the trustee being notified of their termination, the law automatically deems them to have chosen to keep their benefits in a personal account within the existing scheme.

Correct: For an employer utilizing a direct debit arrangement to settle mandatory contributions, the contribution is legally considered paid on the date the trustee receives the employer’s completed remittance statement. This specific regulatory provision ensures that the employer’s compliance is tied to the submission of the required documentation rather than the technical timing of the bank’s clearing process, provided that the employer ensures sufficient funds are available in the designated account for the transaction to succeed.

**Incorrect:** The date the trustee issues the debit instruction is the standard applied to self-employed persons (SEPs) who do not need to submit a remittance statement, rather than employers. The date the funds are actually debited from the employer’s bank account or the date the scheme’s bank account is credited are incorrect because these milestones apply to other payment methods, such as direct credit, where the arrival of funds in the scheme’s account is the determining factor for timely payment.

**Takeaway:** The deemed date of payment for MPF contributions depends on the chosen payment channel; for employers using direct debit, the receipt of the remittance statement by the trustee is the governing factor for determining if the contribution was made on or before the contribution day.