ENG-2010 — Page 132

90 Financial and Monetary Affairs

voluntary schemes established by employers. To tie in with the implementation of the MPF system in 2000, schemes registered under the ORSO that fulfilled certain conditions were exempted from MPF requirements. Members of such schemes may choose to remain in the existing scheme or join an MPF scheme. At year's end, there were 4 247 MPF-exempted occupational retirement schemes covering over 380 161 employees.

Mandatory Provident Fund Schemes Authority (MPFA)

Established in September 1998 under the Mandatory Provident Fund Schemes Ordinance (MPFSO), the MPFA is responsible for regulating and supervising the MPF System and ensuring compliance with the ordinance. It is also the Registrar of Occupational Retirement Schemes. To protect the interests of MPF scheme members, the MPFA closely monitors the operation of MPF trustees and other service providers, investigates cases of non-compliance identified through reports, complaints or proactive inspections, and takes enforcement actions accordingly. The MPFA also conducts MPF investment education to strengthen public awareness of the need to take care of their MPF investment and disseminates messages that will assist scheme members in choosing appropriate funds.

Recent Developments

Since its inception in December 2000, the MPF System has been under continual review to enhance its effectiveness and efficiency. The Mandatory Provident Fund Schemes (Amendment) Bill 2009 was passed on July 8, 2009 to allow employees to transfer in a lump-sum the accrued benefits derived from their mandatory contributions made during their current employment from a contribution account to another MPF scheme of their choice at least once per year (Employee Choice Arrangement). By reducing the portability restrictions on employees' mandatory contributions, it is expected that the new law will create greater competition among MPF service providers and encourage more active management of MPF investment by employees. Preparations for implementing the Employee Choice Arrangement are underway.

When the new law comes into effect, employees are likely to become the major sales targets of MPF intermediaries. Enhancing the regulation of MPF intermediaries will be of critical importance. The Government, the MPFA and the front-line regulators (i.e. SFC, HKMA and IA) are working together to reinforce the existing regulatory regime of MPF intermediaries through legislation to pave the way for the implementation of the Employee Choice Arrangement.

The introduction and impending implementation of the Employee Choice Arrangement will lead to a significant and fundamental change to the MPF System from being employer-based to a system that is more member-based. Raising the financial literacy of scheme members is pivotal to the successful implementation of the Employee Choice Arrangement. To equip scheme members with the knowledge to make informed decisions in managing their MPF investments, the MPFA has intensified its on-going investment education efforts to educate scheme members on decision making at various stages of their MPF investment journey.