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MPF in Hong Kong
Mandatory Provident Fund is a new concept in Hong Kong although it has been quite common in the industrialized countries such as North America and Australia. With the aging population in Hong Kong and the demand of better social welfare from the public, the pressure on the government to provide the safety net to the public has increased tremendously. A very good example is Japan. According to a survey, the ratio of tax- payer to one retiree at the moment is about 8:1. However, this ratio will be changed to 4:1 within 25 years. You can imagine that if the government does not do anything now, the tax rate will have to be increased substantially or order to raise sufficient revenue for the social welfare spending. So there is an urgent need for the government to encourage people to start saving for their retirement. According to government statistics, Hong Kong has over 3.2 million working population of with about 1.2 million are covered by some form of provident fund schemes. The other 2 million people who are mainly working in small and medium size firms or self-employed are not protected. This will be a heavy burden to the Hong Kong government when these people retire in the coming decade. After over 10 years of consultation, Hong Kong government finally gave green signal to Mandatory Provident Fund. The legislation was passed in 1998, one year after the handover of sovereignty of Hong Kong to China, and the first contribution will start in December 2000. Differing from Singapore and Malaysia, Hong Kong Government decided that such service should be provided by the private sector. The Government has set up MPF Authority to regulate the industry. MPF Authority will work closely with the Insurance Authority and the Securities and Futures Commission to regulate the service providers on scheme nature and product development. Up to date, the government has authorized 21 service providers, 44 master trusts and over 240 approved-pooled investment funds. It is anticipated that when these service providers start marketing their products in February 2000, the competition will be tense. In the next chapter, I will discuss what the employers should be aware when they choose a service provider.
Written by John Cheung on 25 Jan, 2000 |