Occupational Pensions Services in Hong Kong

Employee benefit packages are a vital consideration for any employer that wishes to attract and retain the best talent, as well as maintain a loyal and committed workforce. One of the main components of any employee benefit package is occupational pensions or savings provision. Employees from most backgrounds now consider retirement provision to be a key part of their remuneration.

Companies undertaking specialist activities or operating from certain regions such as Asia invariably recruit a high proportion of their workforce from overseas. The relocation, orientation and training of expatriate employees requires considerable investment, making staff retention all the more important.

Hong Kong’s Occupation Retirement Scheme Ordinance (ORSO) applies to all corporate schemes established in Hong Kong – irrespective of where the company is established or trades, or where its employees are based. Companies that operate retirement schemes that fall under the ambit of ORSO can apply to Mandatory Provident Fund Schemes Authority (MPFA) for exemption if more than either 10% or 50 of the scheme’s members, whichever is less, are Hong Kong permanent identity card holders.

ORSO Exempted schemes offer certain advantages over MPF schemes, including no legal requirement for contribution (ORSO schemes can either be Defined Benefit or Defined Contribution schemes), flexible benefit withdrawal and increased diversification of investment portfolios.

Unlike other pensions jurisdictions, there is no minimum retirement age in Hong Kong. The ORSO legislation permits employers to nominate a retirement age of their choosing. It also permits the ‘vesting scale’, which specifies the minimum period employees must work to be entitled to the employer’s contributions, to be varied. For example, if the minimum period of service stated in the vesting scale is three years and the employee has served less than three years, he or she will not be entitled to any part of the employer’s contributions upon termination of employment.

Benefits in Hong Kong are paid out as lump sum, so members are not required to annuitise their capital. Contributions made to an MPF exempted ORSO scheme are tax-deductible up to a maximum of HKD18,000 a year for employees and for an Employer, contributions up to 15% of employees total emolument made to an MPF exempted ORSO scheme are tax-deductible. Investment income and benefits are tax-exempt, which can offer significant tax advantages to expatriate staff who intend to return to a country in Hong Kong’s growing network of tax treaties.

ORSO Exempted schemes can therefore be highly beneficial for non-resident companies. They can also be beneficial for employers using Hong Kong as a platform for regional retirement schemes because companies that are part of the same group may apply to become ‘Participating Employers’. This extends the potential membership to all the eligible employees and directors of these group companies. This can be particularly important for employees based in less politically stable countries.

Hong Kong provides an established, straightforward, low-tax system that attracts legitimate and transparent pension planning for both local and international clients. Sovereign has extensive experience in designing and operating occupational pension schemes. Our clients range from large international businesses to smaller firms just starting out. Sovereign also offers individual portable pension arrangements for internationally mobile employees and senior staff.

Sovereign’s trust-based solutions ensure the legal separation of a plan’s assets from those of its sponsoring employer. This provides an additional layer of comfort to employees and protects the plan from any party seeking to lay claim to the assets of the business. Sovereign consultants will liaise with the sponsoring employer in drafting the trust deed and rules for the plan, including eligibility, contributions levels and investment options. The trustee of the plan will be Sovereign’s registered professional trust company.

Interested in Occupational Pensions Services in Hong Kong?

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Sovereign Trust (Gibraltar) Limited
Tel: +350 200 76173