MPF offsetting abolished: the 2025 change and how LSP/severance is calculated
The MPF 'offsetting' arrangement was abolished on 1 May 2025 (the transition date). Previously employers could use MPF mandatory contributions to offset long service payment (LSP) or severance payment (SP); after abolition, employers can no longer offset the portion for service from the transition date. This better protects employees' retirement savings.
What was 'offsetting', and what was abolished?
'Offsetting' let employers use MPF accrued from their mandatory contributions to offset LSP or SP owed to an employee — eroding the employee's retirement savings. From 1 May 2025 (the transition date), employers can no longer use mandatory contributions to offset LSP/SP for service from the transition date.
Arrangements follow the MPFA and the Labour Department.
What's the benefit for employees?
- MPF accrued from mandatory contributions is no longer offset — retirement savings stay intact.
- For service from the transition date, LSP/SP is unaffected by offsetting.
- Over time this helps build a fuller retirement pot.
Individual cases depend on service length and the pre/post-transition split.
How is LSP/severance 'segmented'?
After abolition, calculation uses a 'segmented' approach, splitting service into a 'pre-transition' and a 'post-transition' portion, each calculated separately. Employers may still use 'voluntary' contributions (not mandatory) to offset; the pre-transition portion has transitional arrangements. The government also runs a multi-year subsidy scheme to help employers adjust.
Actual calculation involves service length, wages and the pre/post-transition split — refer to the MPFA and Labour Department guidance or tools.
What does it mean for your retirement plan?
Abolition keeps your MPF pot fuller, but MPF is still only part of retirement income. Plan it alongside annuities, self-made passive income and healthcare cover, and see the whole cash-flow picture. Start with MPF withdrawal and consolidation strategy.
General education only, not personalised advice; details follow official announcements.
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Frequently asked questions
When was MPF offsetting abolished?
On 1 May 2025 (the transition date), applying to employees who leave on or after that date. Arrangements follow the MPFA and Labour Department.
Can employers still offset LSP/severance after abolition?
Employers can no longer use 'mandatory' contributions to offset the portion for service from the transition date, but may still use 'voluntary' contributions. Calculation is segmented into pre- and post-transition portions.
How does abolition affect employees?
MPF accrued from mandatory contributions is no longer offset, so retirement savings stay intact and, over time, a fuller retirement pot can be built.
Is service before the transition date affected?
Pre-transition service has transitional arrangements, and the government runs a subsidy scheme for employers. Actual calculation follows official MPFA and Labour Department guidance.
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