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Financial and Monetary Affairs
proactive inspections, and takes enforcement action where necessary. The MPFA also offers MPF investment education to strengthen public awareness of the need to take care of their MPF investment and provides information to assist scheme members in choosing appropriate MPF funds. The MPFA's operations are mainly financed by the investment returns generated from a one-off Capital Grant of $5 billion from the Government.
Recent Developments
The Employee Choice Arrangement (ECA) came into operation on 1 November 2012, with a view to increasing market competition, allowing employees once every calendar year to transfer as a lump sum the accrued benefits derived from the employees' mandatory contributions made during their current employment to an MPF trustee and scheme of their choice. MPF trustees have made noticeable competitive moves since it was decided to introduce the ECA. At the end of 2012, the average fund expense ratio of MPF funds with financial year-end dates in 2011 was 1.75 per cent, about 15 per cent lower than the 2.06 per cent level reported in 2007.
To enhance the protection for MPF scheme members following the ECA's implementation, the MPF Schemes (Amendment) Ordinance 2012 was enacted in June and came into operation on 1 November 2012 requiring MPF intermediaries to register with the MPFA before they can carry out sales and marketing activities or give advice in relation to MPF schemes. Non-compliance with the statutory conduct requirements will be subject to disciplinary sanctions imposed by the MPFA, ranging from reprimand or fines to suspension or revocation of registration13.
To encourage saving for basic retirement needs, the maximum RI level was increased from $20,000 to $25,000 per month from 1 June 2012. The MPFA is reviewing the statutory mechanism for adjustment of the RI levels and aims to submit its proposal to the Government in 2013.
The MPF Schemes (General) (Amendment) Regulation 2012, enacted in July 2012, suspends the levy for the MPF Compensation Fund when the fund's reserve level exceeds $1.4 billion, and resumes the levy when the reserve level falls below $1 billion. As at 31 March 2012, the fund's NAV exceeded $1.4 billion and payment of the levy by MPF schemes will be suspended in their financial years beginning on or after 1 September 2012.
Following public consultation in March 2012, the MPFA proposes to introduce legislative amendments by July 2014 explicitly allowing an option to withdraw MPF benefits in stages when scheme members reach 65, and to allow early withdrawal by scheme members certified as suffering from a terminal illness.
Following the announcement of the results of the consultancy study on MPF trustees' administration costs in November 2012, the MPFA has been following up on the measures suggested by the consultant which can be implemented within the existing legislative framework to increase the scope for fee reduction by MPF trustees. The MPFA is also working
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Each registered intermediary has also been assigned a frontline regulator entrusted with clear statutory responsibility and power to monitor its compliance with the statutory conduct requirements.
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