XN000022-1995-07-27 — Page 18

10.

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I should now like to turn to the key changes we propose to make to the Bill during the Committee Stage as well as to comment on those areas where we believe the Bill should remain unchanged.

Coverage and exemption

It is our stated aim for the Bill to cover as many persons in the workforce as possible. At the same time, we do not want to upset participants in existing schemes, whether these are statutory in nature or schemes registered under the Occupational Retirement Schemes Ordinance (ORSO). Under Schedule 1 of the Bill, therefore, any employers and employees who are contributing to an occupational retirement scheme a sum not less than the statutory minimum MPF contribution, of which the employer's contribution must not be less than half the statutory minimum will be exempt from the MPF. This provision has been the cause of much debate among employer organisations. Although we believed it to be a simple solution to the question of interface, since the publication of the Bill many employers have said that they have invested a great deal of time and resources in complying with ORSO requirements. They have asked for more flexibility in the exemption arrangements. In particular, they have expressed concern about the need for ORSO schemes to have to use the MPF definition of relevant income before they qualify for exemption, and about our requirement that such exempt schemes would be closed to new members.

After listening to the views expressed by Members of this Council and by the various deputations, we are now prepared to take a second look at whether the exemption should be widened to meet the requirements of the genuinely generous employers. However, in taking this second look, I must make it clear that further exemption would only be considered on condition that the fundamentals of the MPF Systems would not be compromised. Our policy intention is that both defined contribution and defined benefit schemes are acceptable as MPF Schemes. Indeed, this Bill does not restrict the choice of the employers and employees on the types of schemes. It is acceptable for an employer to set up, for the purpose of meeting his MPF obligation, a defined benefit scheme for his employees, provided that the contribution in respect of each member in the scheme works out to be 10% equivalent of the relevant income of the relevant employee. Accordingly, we will be moving an amendment to the effect that persons who are members of relevant ORSO schemes, whether defined benefit or defined contribution, can be exempt from the provisions of the MPF legislation and provided that they satisfy requirements specified in regulations to be made under the Bill. We shall then be able to discuss further with the organisations concerned the details of the exemption arrangements, and consider further the conditions under which new members may be admitted to such schemes. Obviously, there are regulatory issues which are specific to defined benefit schemes, such as those 'relating to solvency. Again, the provisions in the Bill are adequate to enable detailed regulations and rules to be made for defined benefit schemes as well.