Enjoy Taxe Benefits and Accumulate Your Retirement Savings with MPF Tax Deductible Voluntary Contributions (TVC)

According to the latest data from the MPFA, as of June 2024, the average MPF balance for Hong Kong working population were approximately HK$257,000, which is clearly insufficient to cover retirement expenses. To secure a more comfortable retirement, early savings planning and increasing MPF contributions are key strategies. One effective option to consider is Tax Deductible Voluntary Contributions (TVC), which not only helps grow your retirement savings but also provides tax benefits.

What is TVC? How does it save taxes?

Introduced in 2019, TVC allows members to make additional voluntary MPF contributions while enjoying tax deductions. Under the current tax system, you can claim tax deduction of up to HK$60,000 per tax year. At the highest tax rate of 17% (for the 2023/24 tax year), this could result in savings of up to HK$10,200 in taxes. However, it’s important to note that this deduction cap applies to both TVC and qualifying annuity premiums.

How to claim tax benefits for TVC?

After the end of each tax year, your MPF trustee will issue a TVC Contribution Summary within 40 days, detailing the total contributions made during that tax year. This makes it easy to file your tax return. Please keep in mind that your TVC tax deductions are calculated together with qualifying annuity premiums. You can use TVC tax calculators provided by MPF providers to estimate your potential tax savings more accurately.

Leveraging the Power of Compound Interest for Long-Term Growth

Beyond the immediate tax savings, TVC offers the potential for long-term investment growth. Thanks to compound interest, your contributions accumulate and grow over time, providing greater financial security in retirement.

For example, if a 22-year-old graduate contributes HKD 1,500 per month (HKD 18,000 annually) into TVC and earns an average net return of 3.5% per year, their TVC savings could grow to nearly HKD 1.8 million by the time they retire at 65. Of course, actual returns may vary due to market fluctuations, so it’s essential to stay informed about investment performance.

Since its launch, TVC has been gaining popularity among Hong Kong employees. As of June 2024, the number of TVC accounts has surpassed 77,000, marking a 10% year-on-year increase and an over 80% surge compared to September 2020. This upward trend underscores the growing awareness of TVC’s tax advantages and investment potential.

TVC Withdrawal & Transfer Arrangements

• TVC funds are generally locked in until age 65, unless you qualify for early withdrawal under specific legal conditions.
• However, you can transfer your entire TVC balance to another MPF scheme at any time.

Last but not least, many MPF providers offer special promotions for TVC account openings, usually before the end of March each year. If you’re considering TVC, you may compare different promotion plans and select the one that best fits your financial goals.

Disclaimer: The information, data, and documents provided on this website are for general reference purposes only and should be used as self-help tools. Investment involves risks, and unit prices may fluctuate. Past performance figures shown are not indicative of future performance. BestServe Financial Limited and its content providers are not responsible for any loss or damage caused by reliance on any information or advice made in this website.

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