ENG-1998 — Page 116

FINANCIAL AND MONETARY AFFAIRS

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Commissioner of Insurance is appointed the Registrar of Occupational Retirement Schemes to administer the ORSO.

The ORSO does not compel employers to establish occupational retirement schemes for their employees. Its objective is to regulate all voluntarily established occupational retirement schemes through a registration system so as to ensure that these schemes are properly administered and funded, and to provide greater certainty that retirement scheme benefits promised to employees will be paid when they fall due.

All registered schemes must meet certain basic requirements, including asset separation (the assets of a scheme must be kept separate and distinct from the assets of the employer or the scheme administrator); independent trusteeship (there should be at least one independent trustee who must not be the employer, his employee or his associate); restricted investments (any loan to the employer of the scheme or his associate out of the scheme's assets is prohibited, as is any excessive investment in the business undertaking of the employer); funding (the assets of a scheme must be sufficient to meet its aggregate vested and past service liabilities and the scheme shall be funded in accordance with the terms of the scheme); independent audit; actuarial reviews (for defined benefit schemes); and the annual submission of audited financial statements to the Registrar. There are also requirements for disclosure of information to the scheme members regarding the operation of the scheme.

As at December 31, 1998, there were 17 229 registered schemes and 1 976 exempted schemes. These registered schemes covered an aggregate of 908 568 employees.

Mandatory Provident Fund Schemes

The Mandatory Provident Fund Schemes Ordinance (MPFSO), enacted in August 1995 after extensive consultation, provides the framework for a privately managed mandatory system of provident fund schemes that will cover members of the workforce aged 18 or above. The MPFSO was amended in March 1998 and supplemented by two sets of Regulations enacted in April 1998 setting out the standards and detailed requirements governing the operation of the Mandatory Provident Fund (MPF) System. The MPF System will provide for joint contributions by the employer and employee, each contributing 5 per cent of the employee's relevant income to a registered MPF trust scheme, subject to the maximum and minimum level of income for contribution purposes. The accrued benefits will be fully vested in the scheme members and can be transferred from scheme to scheme when employees change or cease employment. A self-employed person will have to contribute 5 per cent of his or her relevant income. Benefits must be preserved until retirement.

A statutory body, the Mandatory Provident Fund Schemes Authority (MPFA), tasked with the responsibility of the prudential regulation and supervision of the MPF System and compliance with the MPFSO, was set up in September 1998. Another statutory body, the Mandatory Provident Fund Schemes Advisory Committee, has also been established to advise the MPFA on the operation of the MPFSO.

Since its establishment, the MPFA has proceeded with the multi-faceted preparatory work essential for launching the MPF System. One of the main tasks is the installation of an information management system (IMS) to enable the MPFA to