ENG-2002 — Page 122

FINANCIAL AND MONETARY AFFAIRS

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Retirement Protection Schemes: Mandatory Provident Fund Schemes and Occupational Retirement Schemes

Main Features

On December 1, 2000, the Mandatory Provident Fund (MPF) System was implemented to encourage the workforce to save and invest for their retirement protection. The system, which was formulated after extensive consultation, is a privately managed, employment-related mandatory system of provident fund schemes. Unless exempted, employees and self-employed persons aged between 18 and 65 are required to participate in MPF schemes.

The MPF System provides 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 levels of income for contribution purposes. The accrued benefits are fully vested in the scheme members and can be transferred from scheme to scheme when employees change employment or cease to be employed. A self-employed person has to contribute 5 per cent of his or her relevant income. In normal circumstances, benefits must be preserved until the scheme member attains the retirement age of 65.

By year-end, about 94 per cent of the employers, 96 per cent of the relevant employees and 81 per cent of the self-employed persons have enrolled in MPF schemes. The total MPF assets amounted to about $55 billion, with monthly MPF contributions amounting to some $2 billion.

Unlike the compulsory MPF Schemes, occupational retirement schemes (ORSO schemes) registered under the Occupational Retirement Schemes Ordinance (ORSO) are voluntary schemes established by employers. The objective of the ORSO is to regulate such schemes through a registration system to ensure that they are properly administered and funded. All registered schemes must meet certain requirements, including asset separation, independent trusteeship, restricted investments, funding, independent audit, actuarial reviews, information disclosure and the submission of audited financial statements to the Registrar of Occupational Retirement Schemes. To tie in with the implementation of the MPF Schemes, ORSO schemes that fulfilled certain conditions were exempted from MPF requirements. Members of such schemes may choose to remain in the existing scheme or join a MPF scheme. At year- end, there were 5782 MPF-exempted ORSO schemes covering over 500 000 employees.

Mandatory Provident Fund Schemes Authority

The Mandatory Provident Fund Schemes Authority (MPFA), which was set up in September 1998 under the Mandatory Provident Fund Schemes Ordinance (MPFSO), is tasked with the responsibility of regulating and supervising the MPF System and ensuring compliance with the MPFSO. Two statutory committees, the MPF Schemes Advisory Committee and the MPF Industry Schemes Committee, have been established to advise the MPFA on the overall operation of the MPFSO and the Industry Schemes, respectively. The MPF Schemes Appeal Board has also been set up under the MPFSO to hear appeals against the decisions of the MPFA.

To ensure that the interests of MPF scheme members are protected, the MPFA closely monitors the operation of MPF trustees and other service providers, investigates complaints about non-compliance and takes enforcement actions