MPF offsetting arrangement to end in May 2025

It will end the practice of using mandatory MPF contributions to offset SP and LSP.

The government has announced that the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 will take effect on 1 May 2025.

The ordinance, passed by the Legislative Council in June 2022, will end the practice of using mandatory MPF contributions to offset severance payments (SP) and long service payments (LSP).

Employers will still be allowed to use voluntary MPF contributions and gratuities based on service length for this purpose.

The abolition will not apply retroactively. If an employee's employment began before the effective date of the Amendment Ordinance, employers can continue to use accrued benefits from both mandatory and voluntary MPF contributions (made before, on, or after the effective date) to offset SP/LSP for the period prior to 1 May 2025.

The amendment will also affect occupational retirement schemes under the Occupational Retirement Schemes Ordinance (Cap. 426), the two school provident funds under the Grant Schools Provident Fund Rules (Cap. 279C) and Subsidised Schools Provident Fund Rules (Cap. 279D), as well as overseas occupational retirement schemes that are exempt from the MPF System.

To support employers, the government will also launch a 25-year Subsidy Scheme for Abolition of MPF Offsetting Arrangement starting on 1 May 2025. The scheme will help cover the costs of SP/LSP after the offsetting arrangement ends.

The commencement notice will be tabled for negative vetting at the Legislative Council on 4 December.