In Hong Kong, the Mandatory Provident Fund Schemes Ordinance (MPFSO) establishes a regime for employees to be enrolled in a provident fund scheme to which contributions are made on a monthly basis. This is designed to provide workers with financial security upon retirement.
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.
The government recently amended the MPFSO to allow the early withdrawal of benefits where an employee has been diagnosed with a terminal illness and their life expectancy is reduced to 12 months or less. This amendment came into effect on August 1, 2015.
An application for early withdrawal on the grounds of terminal illness can be made to the trustee of the fund. It should be accompanied by a medical certificate from a registered practitioner of Chinese or Western medicine and a copy of the employee’s identity card.
An employee who becomes 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.
The Existing Rights
There are a number of other grounds on which an individual may apply for early withdrawal of MPF benefits.
The first is early retirement, where an individual has reached 60 years of age and has permanently ceased employment or self-employment. The application should be supported by evidence of the individual’s age and a statutory declaration to the effect that the individual has permanently withdrawn from the workforce.
Another case is permanent departure from Hong Kong, where an employee has decided that they will leave the city absolutely. Benefits can be withdrawn early only once on this ground. The application must be supported by evidence that the individual has a right to lawfully reside in another country and a statutory declaration to the effect that the employee will depart permanently from Hong Kong on a specified date.
If an employee becomes totally incapacitated, and is no longer fit to perform their prior work, he or she can also apply for early MPF withdrawal. The application must be supported by evidence of the role being performed, and a medical certificate confirming that the individual is no longer fit to perform that role.
Benefits can also be withdrawn by an employee if the balance is very small. These are MPF accounts with balances that do not exceed HK$5,000 and where no contributions have been made for at least 12 months.
Naturally, if an employee dies, their accrued MPF benefits will become part of their 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 even imprisonment.
The MPF Authority recently warned the public that it has been maintaining close contact with police and MPF trustees to identify and deal with instances of false declarations, and will continue to do so.
The introduction of a right to withdraw MPF benefits early on the ground of terminal illness should, 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, 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.
This article appeared in the Classified Post print edition as Changes to MPF ordinance help terminally ill.