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Financial and Monetary Affairs
In addition, the IA works closely with regulators in other jurisdictions in regulating major insurance groups. In April 2012, the IA chaired for the first time a supervisory college12 in Hong Kong for an insurance group based in Hong Kong with operations in a number of jurisdictions.
Following a three-month public consultation in 2011, the Government is preparing the enabling legislation to establish a Policyholders' Protection Fund (PPF) to enhance market stability and provide a safety net for policyholders in the event of an insurer becoming insolvent. It aims to introduce the bill in the 2013-14 legislative session.
In addition, in October 2012 the Government launched a three-month consultation on the key legislative proposals to establish an independent Insurance Authority, in line with international practice that financial regulators should be financially and operationally independent of the Government, and to modernise the insurance industry regulatory infrastructure to facilitate the stable development of the industry and provide better protection for policyholders. The Government plans to introduce the legislation into the Legislative Council by the end of 2013.
Mandatory Provident Fund Schemes and Occupational Retirement Schemes
Main Features
The Mandatory Provident Fund (MPF) System, implemented on 1 December 2000 to assist the workforce to start saving for their retirement early, is a privately managed, employment-related mandatory system of provident fund schemes. Unless exempted, employees and self-employed persons who are 18 years of age or above, and below the age of 65, are required to join an MPF scheme.
The employer and employee are each required to contribute five per cent of the employee's relevant income (RI) to a registered MPF scheme as mandatory contributions, subject to the maximum and minimum levels of RI for MPF contribution purposes. The accrued benefits can be transferred to another MPF scheme when employees change employment or cease to be employed. Since 1 November 2012, the accrued benefits derived from the employees' portion of mandatory contributions made during their current employment can also be transferred on a lump sum basis once every calendar year. A self-employed person must contribute 5 per cent of his or her RI. Accrued benefits derived from mandatory contributions must be preserved until a scheme member attains the retirement age of 65, unless the member meets any of the statutory conditions for early withdrawal of benefits. At the end of 2012, close to 100 per cent of employers (about 259,800), 99 per cent of relevant employees (about 2,375,100) and 65 per cent of self-employed persons (about 220,400) participated in MPF schemes. Total NAV of MPF assets amounted to about $440 billion.
Unlike the MPF schemes which are mandatory in nature, occupational retirement schemes registered under the Occupational Retirement Schemes Ordinance (ORSO) are voluntary schemes established by employers. To tie in with the implementation of the MPF System in 2000, operators of ORSO schemes that fulfil certain conditions may apply for exemption from
12 A forum for co-operation and communication between supervisors in different jurisdictions, established for the
effective supervision of cross-border insurance groups.
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