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The Mandatory Provident Fund Schemes Advisory Committee met today (November 29) and was briefed on the work progress of the Mandatory Provident Fund Schemes Authority (MPFA) over the past year.

Chairman of the Committee, Professor Nelson Chow Wing-sun, SBS, JP, said after the meeting that the MPF System had rapidly received wide public acceptance and support since its inception last December. He hailed the first year of work by the MPFA as a year of accomplishments.

Professor Chow said, "By and large, the System has achieved considerable success in major areas in terms of enrollment, public acceptance as well as scheme operation. The enrollment rate, in particular, has already reached 95 per cent and this has never been achieved elsewhere in the world. The social benefits of the System will be felt by many future generations to come."

As at the end of October, 209,000 employers, 1,743,000 employees and 301,000 self-employed persons have joined MPF schemes, representing 88 per cent, 95 per cent and 91 per cent of the respective relevant population.

At today's meeting, the Committee also discussed the issue of introducing a mechanism to adjust the maximum and minimum levels of relevant income for MPF contributions.

Advisory Committee members at today's meeting believed it would be most appropriate that the minimum and maximum income levels be reviewed every four years. The minimum income will be set at a certain percentage of the median income and the maximum level calculated by scheme coverage.

Prof. Chow said, "The overriding spirit of the MPF System is that income-earning individuals pay for their own retirement protection. The minimum income level should not be set at a level higher than 50 per cent of the median income."

Committee members also agreed that in principle 90 per cent scheme coverage should be used as a basis for setting the maximum income level.

The professor pointed out that the review mechanism agreed by the committee today would be put to the MPFA Management Board for consideration. Whether or not the income levels will actually be adjusted after a review will have to be left for the Legislative Council's discussion and deliberation.

Regarding scheme assets, as at 30 September 2001, the Aggregate Net Asset Values of all MPF schemes amounted to $28.282 billion, including assets transferred from the voluntary occupational retirement schemes (ORSO). Assets transferred from the ORSO schemes have stabilized in the past few months.

Amongst the $28.282 billion scheme assets, 45 per cent has been invested in balanced funds, 22 per cent in guaranteed funds, 16 per cent in short-term money market funds (including capital preservation funds), 16 per cent in equity funds and one per cent in bond funds.

For the month of September, the total amount of MPF contributions stood at about $2 billion.

On supervision of trustees and MPF investment products, the MPFA reported that supervision of the 20 approved trustees have been effective. The MPFA will continue with its regulatory work to ensure trustees' ongoing compliance with the MPF legislation and provision of quality service.

Efforts will be made to ensure that all MPF investments comply with the statutory requirements. To date, there are a total of 51 registered MPF schemes in the market, comprising 300 approved constituent funds.

On the enforcement front, more than 7,200 inspections have been conducted up to the end of October. The MPFA receives on average 700 complaints each month, 85 per cent of which are employer-related, and 13 per cent related to service providers. Of the complaint cases against employers, about 80% are cases about default contributions.

For non-complying employers, the MPFA has issued surcharge notices or referred individual cases to the Police and Department of Justice for prosecution.

By mid November, applications for 182 summonses involving 55 employers have been made to the Police. So far, 25 employers pleaded guilty and 4 were found guilty following trials. Fines imposed ranged from $2,000 to $36,000. The remaining cases are pending appearance before court.

Depending on the circumstances of individual cases, the MPFA will also consider pursuing claims on behalf of the employees to recover default contributions.

Professor Chow said: "Committee members are, on the whole, satisfied with the enforcement efforts taken during the year. Effective enforcement is crucial to the ongoing success of the System, whereby the interests of scheme participants must be underpinned."

"We are also glad to know that the MPFA has done a good deal of work in investment education, in promoting the concept of long term investment and progress has been reported. Public education is a long term undertaking and it remains a major thrust of the MPFA in the coming year."




End/Thursday, 29 November, 2001