ENG-2018 — Page 107

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Financial and Monetary Affairs

Risk-based Capital Regime

The IA is engaging stakeholders in developing a risk-based capital (RBC) regime for Hong Kong's insurance industry. It plans to conduct the third quantitative impact study within 2019 to collect industry data so as to analyse the impact of RBC to the industry and determine the capital requirements. It also plans to issue the Guideline on Enterprise Risk Management within 2019.

Mandatory Provident Fund System

MPF schemes had a net asset value (NAV) of around $813 billion at the end of 2018 and an annualised rate of return of 3.2 per cent between December 2000, when the MPF System was launched, and December 2018.

Chart 7

HK$ Billion

1,000

800

Total NAV of MPF Schemes

600

646

591

565

400

200

844

813

0

2014

2015

2016

2017

2018

Year

As one of the pillars of retirement protection, the MPF System helps the Hong Kong workforce set aside savings for retirement. Unless exempted, employees and self-employed persons (SEPs) aged 18 to 64 are required to join an MPF scheme. At the end of 2018, about 84 per cent of the employed population were covered by the MPF System or other forms of retirement schemes.

The MPF System is employment-based. An employer is required to contribute 5 per cent of an employee's relevant income (RI) as mandatory contribution for the employee, subject to a maximum RI level. Employees are required to make the same amount of contributions for themselves unless their Rls are below the minimum level. SEPs must also contribute 5 per cent of their Rls, subject to the minimum and maximum levels.

MPF benefits, comprising accumulated mandatory contributions and investment returns, must be preserved until a scheme member reaches the age of 65 or meets a statutory condition for early withdrawal of benefits.

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