In Hong Kong, the Mandatory Provident Fund Schemes Ordinance (the MPFSO) establishes a regime for employees to be enrolled in a provident fund scheme to which contributions are to be made on a monthly basis. This is designed to provide workers with financial security upon retirement. As a general rule, a minimum level of benefits in such scheme may be withdrawn only once the employee reaches 65 years. Benefits in excess of that minimum amount may be withdrawn in accordance with the governing rules applying to the particular MPF scheme.
While it is comforting for employees to know that savings have been put aside for their retirement, it is also important that employees can access those benefits earlier if there is a genuine need to do so.
New right to withdraw on ground of terminal illness
The government has recently amended the MPFSO to allow for the early withdrawal of benefits where an employee has been diagnosed with a terminal illness and his life expectancy is reduced to 12 months or less. This amendment came into effect on 1 August 2015.
An application for early withdrawal on the ground of terminal illness can be made to the trustee of the fund in the prescribed form, and should be accompanied by: (i) a medical certificate from a registered medical practitioner or registered Chinese medical practitioner; and (ii) a copy of the employee's identity card.
An employee who falls terminally ill but is still able to work will continue to accrue MPF benefits through monthly contributions and can make multiple applications for early withdrawal on this ground.
Other rights of early withdrawal
Other grounds on which an individual may apply for early withdrawal of MPF benefits are as follows.
- Early retirement: If an individual has reached 60 years of age and has permanently ceased employment or self-employment. The application should be supported by: (i) evidence of the individual's age; and (ii) a statutory declaration to the effect that the individual has permanently withdrawn from the workforce.
- Permanent departure from Hong Kong: Where an employee has or will depart Hong Kong permanently. Benefits can be withdrawn early only once on this ground. The application must be supported by: (i) evidence that the individual has a right lawfully to reside in another country; and (ii) a statutory declaration to the effect that the employee will depart permanently from Hong Kong on a specified date.
- Total incapacity: If an employee becomes incapacitated and is no longer fit to perform the work that he was performing prior to becoming incapacitated. The application must be supported by: (i) evidence of the role performed by the employee before his incapacity; and (ii) a medical certificate confirming that the individual is no longer fit to perform that role.
- Small Balance: Benefits which are held for an employee in an MPF scheme which do not exceed $5,000 and where no contributions have been made for at least 12 months may be withdrawn on application to the trustee.
- Death: In the event of an employee's death, accrued MPF benefits will become part of the employee's estate and may be paid out to the employee's personal representative.
It is a criminal offence to make a false declaration and an individual who does so in an attempt to withdraw benefits early may, on conviction, be liable to a fine and (potentially) imprisonment. The MPF Authority has recently warned the public that it has been and will continue to maintain close contact with police and MPF trustees to identify and deal with instances of false declarations.
The introduction of a right to withdraw MPF benefits early on the ground of terminal illness will in a small way help to ease the financial burden likely to be faced by many individuals who are diagnosed with a terminal illness and any family members who are financially dependent on them. Together with the other rights of early withdrawal described above, this amendment to the MPFSO helps to balance more effectively the need to provide a mechanism for retirement savings while recognising that in certain circumstances early withdrawal will help individuals financially to deal with unexpected difficulties that may arise.