(6) Proposals for private sector provident fund schemes
We understand that the Government intends to make private sector
The Foundation provident funds schemes compulsory for all employers. welcomes this policy as a longer term objective, in preference to any
However, the Foundation would set a central provident fund scheme.
higher priority on the speedy establishment of an old age pension, as described in (5) above.
The Foundation has the following recommendations for the improvement of private sector provident fund schemes:
* Such schemes should indeed be made compulsory for all employers. However in view of the very large number of small firms in the territory, there should be a transition period of at least three years to enable employers, and the institutions providing fund services, to adjust.
*The Government must launch an information programme to educate employers as to their obligations and employees as to their rights.
The former * A comprehensive regulatory system must be developed. Occupational Retirement Benefits Bill envisaged a department within the Insurance Commission regulating the sector. In view of the size and importance of the sector, the Foundation would prefer the establishment of an entirely separate Retirement Benefits Commission.
* Small employers should be encouraged to participate in pooled schemes, of which many are offered by the private sector.
* All retirement benefit schemes should be separately funded.
* Certain anomalies in the taxation of retirement benefits should be clarified. For example, under certain circumstances a one-off contribution to an unapproved retirement scheme may be tax-deductible for the employer in the year in which it is paid, whereas it is only deductible over 5 years for the employer with an approved scheme. tax rules also encourage the employee to take his entitlement out of the scheme in the form of a lump sum, rather than a regular income that may in the long run be more useful to him.
The
* The use of offshore trustees and custodians should be recognised in the regulations.
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