Actuarial Valuation of LSP and DBO
With the removal of MPF offsetting, companies in Hong Kong will carry a larger long-term obligation to pay Long Service Payments to eligible employees. For Finance and HR teams, this has raised an important question: How much will this actually cost us over time?
At Valtech, we help answer this clearly.
With the implementation of the new legislation to abolish MPF offsetting against Long Service Payment (LSP), employers in Hong Kong will bear more significant long-term defined benefit obligations. This shift increases the need for reliable actuarial valuation to accurately measure and manage these liabilities.
Valtech Valuation is recognized as a trusted provider of valuation advisory. We apply the Projected Unit Credit Method (PUC) in a comprehensive manner. Instead of assuming a single hypothetical payout event at age 65, our actuarial model simulates and evaluates the potential benefit payout in each year of an employee’s service life. This produces a more realistic and transparent projection of obligations.
While the primary purpose of actuarial valuation is to meet financial reporting requirements, Valtech’s approach goes further. Our granular projection capability allows us to clearly illustrate how obligations evolve year by year, identify employee groups with the highest cost exposure, and enhance communication with both Finance and HR teams. For organizations concerned about staff cost planning and LSP obligations, we can also analyze the potential Government subsidy applicable under the transitional arrangements, providing valuable insight for budgeting and long-term workforce planning.
From LSP to DBO Advisory
LSP in Hong Kong involves a complex set of calculation rules, including pre-transition vs. post-transition treatment and the offsetting of employer contributions (e.g., voluntary MPF contributions). Valtech has developed a complete actuarial program, certified and reviewed by a Fellow of the Actuarial profession, to model these rules accurately and efficiently.
Leveraging this actuarial engine, Valtech is also able to support Defined Benefit Obligation (DBO) valuations for international clients across jurisdictions, based on statutory or contractual employee benefit schemes.
Our capability enables clients to comply with reporting standards while gaining clarity and strategic visibility over their long-term employee benefit commitments.
About Valtech Valuation
Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The firm is renowned for its expertise in advanced valuation techniques, customized valuation models, data-driven insights, and adherence to compliance and reporting standards. The firm has a solid track record in valuation advisory for listed companies, private equity, fund managers, and financial institutions. Valtech’s qualified team comprises members with PhDs, CPA (HKICPA), CFA, Chartered Valuation Surveyors of the Royal Institution of Chartered Surveyors, and valuers accredited with Business Valuation (ABV) by AICPA and CVA qualifications in Singapore. Valtech continues to expand into more markets by leveraging its valuation platform and recruiting local experts.
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