25 -
Minimum salary jevel
Secondly, the minimum salary level. This recognises that for some of those earning below a minimum level, which could be set at say about $4000 a month, the contribution might cause financial hardship. We shall allow such employees to elect whether or not they wish to contribute to their employer's scheme. If they elect to contribute, though, then the employer must also pay his share of the contribution. This is an important point. Lowly paid employees will have a choice in the way they handle their own financial affairs.
The MPF will be open to all employees, so it is not correct to say, as some critics have said, that it will not take care of those at the lower end of the economic ladder. The MPF will provide a degree of income security upon retirement even to those employees who might not expect to participate in a voluntary occupational retirement scheme in the near future. For every dollar an employee puts into the MPF, there will be a corresponding dollar from his employer. It will also allow them to participate in an investment scheme where their contributions would be pooled together to yield a better return - an opportunity which otherwise might not have been open to them. When we move on to the consultancy, we shall also consider the needs of the self-employed, and whether they should take part in the MPF.
Residual pool scheme
We expect the majority of employers to be able to find a retirement scheme provider in the private sector, but we realise there are going to be some who for one reason or another are unable to do so. This may be particularly relevant to smaller businesses, or those with employees on low incomes. We are also conscious in this respect of the points made by the insurance and fund management industries that the administrative cost of managing small contributions would be disproportionately large and might eat into the capital. To ensure that all employers are able to comply with the law, there will be a residual pool scheme which will provide coverage for their employees. Such a scheme would still be run on commercial principles. Let me remind Members that the residual pool scheme is not the same as a central provident fund, about which I shall be speaking later on. It is simply an alternative means of providing retirement protection essentially for those who are unable to find it in the open market. It is one of a number of points which we shall discuss in greater detail with our consultants. In addition, as Members will know, many employers offer a choice of retirement schemes to provide for the varying needs of their employees. We would want this option of choice to remain continued.