XN000022-1995-07-24 — Page 4

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Portability

As drafted, Clause 13 of the Bill provides for persons who change job the choice of leaving their accrued benefits in the form of individual accounts with the trustee who runs the scheme of their former employer, or to transfer their accrued benefits to the new scheme. No one would therefore be compelled to leave a master trust scheme, run for his former employer, which has been doing well and may produce a higher rate of return. Nor would anyone be forced to move to a new scheme which might not be doing so well. the Administration thinks that this would reduce the frequency of transfers of accrued benefits. However, some Members have contended that the clause does not reflect Government's policy intention. Some also expressed concerns that the transfer costs might be significant.

To put the matter beyond doubt, the Administration will move a committee stage amendment to Clause 13 to make it clear that an employee may leave his accrued benefits with a master trust on change of job if he thinks that this is desirable. The process of transfer would thence be straightforward and should not incur any significant cost. In addition, for the better protection of accrued benefits, the Government can provide in the subsidiary legislation that except for the incidental costs and expenses of remitting the money involved, no deductions shall be made against the accrued benefits under transfer.

Residual Provident Fund Scheme

At present, Clause 22 of the Bill allows the MPF Schemes Authority to authorise a corporate trustee to be the trustee of a Residual Provident Fund Scheme if the Authority thinks it is desirable, among other things, to effect access to membership of a registered scheme for persons who are otherwise unable to obtain such membership. The consultants have advised that there would be sufficient individuals and companies in the market interested in becoming approved trustees, and that as such it would probably not be necessary to provide Residual Provident Fund Schemes. The industry also agrees with the consultants.

The Government has, nonetheless, included in the Bill a provision for these schemes to be established. However, concern has been expressed that Clause 22, as drafted, would not require the Authority to set up such schemes until after Section 6 was in operation, and as such, may not provide sufficient comfort to individuals who are unable to find a scheme in the market.

To allay such fears, the Administration will now amend Clause 22 to require the Authority to take all necessary steps to cause to be established Residual Provident Fund Schemes prior to the commencement of any of the provisions of Section 6. The purpose of such schemes would be to provide membership, as a scheme of last resort, to those persons who had been unable to find a scheme themselves, and where the Authority is otherwise unable to find one for him.