Personal finance

MPF vs ORSO: How to Decide, How Much to Put In

MPF vs ORSO

When starting a new job in Hong Kong, some employers offer new employees the choice of MPF vs ORSO for retirement savings.  Many employers only offer MPF, and while I earlier posted some data on some of the best MPF plans in Hong Kong in lowering fees below 1% (still many times higher than many comparable US plans), I still find MPF plans to be overly rigid and expensive for what they offer.  Unless you are fortunate enough to work for a employer that offers an ORSO plan with lower fees and/or better options, you have no choice but to have HK$3,000/month between you and your employer go into an MPF plan that you can hopefully at least invest in a globally diversified stock index for less than 1%/year.

If you do have the choice between an MPF and an ORSO, some questions to consider include:

  1. Will ORSO contributions all be made by you, your employer, or a combination of both?  Some ORSO plans I’ve seen require no employee contribution, which some view as an immediate plus.
  2. In MPF, your employer will usually put in at least the HK$1,500 mandatory amount if you make more than HK$30,000/month – will your employer contribute at least as much to your ORSO?
  3. Does your employer match any voluntary contributions to the plan?  If so, I usually recommend contributing up to the match if you plan to stay with the employer long enough to vest, as an employer match is close to being free money.
  4. Is there any recognition of the ORSO plan in your home country? Very few plans have this, but this would also be a huge plus.
  5. Does the ORSO offer any better, different, or lower-cost investment options compared with the MPF option?

Sometimes the employer does not have an MPF exemption for their ORSO scheme, but instead offers it as a “top up” where you must contribute to MPF, but may optionally also contribute to ORSO.  Here I evaluate the ORSO scheme like any other savings plan, and generally would only go for it if there are significant tax savings or an employer match.  Otherwise, I find investing in an individual brokerage account outside of work that can be invested in freely in stocks, bonds, or lower cost ETFs is the much better option.

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