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“Retirement” is supposed to be a fruitful result of a busy life. However, many people cannot enjoy a worry-free retirement. Some people even think that retirement is an unreachable dream. After all, insufficient retirement savings is the root cause. The aging trend of Hong Kong population continues. The average life expectancy for Hong Kong people is more than 80 years old. With facing long-term retirement living expenses, cost of inflation and medical fees, we should plan ahead to have a comprehensive retirement plan in order to achieve a worry-free retirement.
To encourage the working population developing a saving habit and plan ahead for their retirement, the Hong Kong government has passed the legislation1 to provide tax benefits to members who make tax deductible voluntary contributions (“TVC”) with effect from 1 April 2019.
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|Enjoy tax benefits||
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TVC is a simple, convenient and flexible arrangement for retirement savings. Eligible persons can open TVC accounts in any MPF schemes which offer such accounts and make contributions directly to the accounts.
Tax concessions on TVC starts from 1 April 2019. Eligible persons can claim deductions when you fill in the tax return for the year of assessment 2019/20 for your TVC made from 1 April 2019 to 31 March 2020.
The following persons are eligible to open a TVC account in an MPF scheme:
You can open a TVC account and make contributions directly to the account. You can then enjoy tax deduction under salaries tax or tax under personal assessment for your TVC. The maximum tax deduction cap for the year of assessment 2019/2020 is HK$60,000, which is an aggregate limit for TVC and qualifying annuity premium.
If you have more than one TVC account, the maximum tax deduction cap applies to the total amount of contributions of all of your TVC accounts. To facilitate your filing of tax return, MPF trustee will provide a TVC contribution summary to you each year.
You can transfer all balance in a TVC account to another TVC account under a different scheme at any time. If you wish to transfer the balance in a TVC account to another MPF scheme, all you need to do is to fill in the "Scheme Member's Request for Transfer of Tax Deductible Voluntary Contributions" (Form MPF(S)-P(T)) and then send it to your new scheme trustee, the form can be obtained from MPF trustee or MPFA.
To meet the purpose of encouraging extra savings for retirement, TVC will be subject to the same preservation requirements of mandatory contribution. You can only withdraw TVC account balance upon reaching 65 years of age, or on other statutory grounds. Contributions exceeding the tax deduction cap cannot be withdrawn early either.
Withdrawal arrangement of TVC is the same as that of mandatory contribution. You should submit the completed claim form to your MPF trustee and provide the supporting documents required.
Similar to other types of contributions, you have the right to choose the constituent funds offered by the MPF scheme. If you have not given any investment instructions, your TVC will be invested according to the Default Investment Strategy for your investment.
The current tax deductions for mandatory contributions will not be affected by the implementation of TVC. The existing maximum amount deductible for mandatory contributions (HK$18,000) will not be affected after the implementation of TVC.
Investment involves risks and past performance is not indicative of future performance. Investment return may rise as well as fall due to market condition and currency movement which may affect the value of investments. The value of units may vary due to changes in exchange rates between currencies. Emerging markets may involve a higher degree of risk than in developed markets and are usually more sensitive to price movements.
Issued by Sun Life Hong Kong Limited (Incorporated in Bermuda with limited liability)
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