2. Question 1:
What is the Mandatory Provident Fund,
when was it launched, and what pension
schemes were in place before the launch
of the MPF?
Presented by Leslie Tong
3. Mandatory Provident Fund (MPF)
Compulsory retirement scheme in Hong Kong
All employers in Hong Kong have to join
Implemented on 1st December 2000
Both employers and employees contribute to the fund
If your monthly salary is above $6500, the current
contribution rate is 5% of salary, with a cap of $1000.
Employer will choose a MPF provider.
Employee can choose a fund offered by the MPF
provider.
Employee will receive the benefits upon retirement.
4. Mandatory Provident Fund (MPF)
(continued)
Before the implementation of MPF:
Only some (not all) companies offer retirement benefits to
their employees
Different employers have different retirement schemes.
It is governed under ORSO. (Occupational Retirement
Schemes Ordinance)
Source: Hong Kong Fact Sheet: MPF Sheet
http://www.gov.hk/en/about/abouthk/factsheets/docs/mp
f.pfd
6. Mandatory Provident
Fund Schemes Authority
Role
• The MPFA was established in September 1998 under the
Mandatory Provident Fund Schemes Ordinance (MPFSO)
to regulate and supervise the operations of provident
fund schemes.
Mission
• The mission of the Mandatory Provident Fund Schemes
Authority (MPFA) is to ensure the provision of retirement
protection for Hong Kong's workforce through an
effective and efficient system of prudential regulation
and supervision of privately managed provident fund
schemes.
7. Responsible
Exercise such for ensuring Register
other functions compliance provident fund
as are conferred with the schemes as
or imposed on MPFSO registered
the MPFA schemes
Promote and Approve
encourage the qualified
development of persons to be
the retirement MPFSO approved
scheme industry trustees
in Hong Kong
Consider and
Regulate the
propose reforms
affairs and
to the law Make rules or activities of
relating to guidelines for approved
provident fund the payment trustees
schemes of mandatory
contributions
9. Who needs to contribute to MPF?
All employees aged between 18 to 64
Self employed workers also included
Begin contribution after 60 days of employment
People that are exempted are:
Self-employed hawkers
Household employees (domestic helpers)
Employees already covered under ORSO
Expatriate workers working in HK for less than one year
Expatriate workers already covered under overseas schemes.
Source:
www.gov.hk/en/about/abouthk/factsheets/docs/mpf.pdf
10. Q3.4:What does ‘relevant income’ mean?
"Relevant income" refers to all payments in monetary terms given to
employees, including wages, salary, leave pay, fee, commission, bonus,
gratuity, perquisite or allowance (including housing allowance or other
housing benefit), but excluding severance payments and long service
payments.
How are contributions calculated?
Increase in the Minimum Level of Relevant Income for MPF Contributions
to HK$6,500.
The minimum level of relevant income in respect of Mandatory Provident
Fund (MPF) contributions has been increased to HK$6,500, effective 1
November 2011, from the original level of HK$5,000.
For the contribution periods starting on or after the effective date,
employees with a monthly relevant income of less than HK$6,500 are not
required to contribute, but their employers must make the employer’s
contribution.
Self-employed persons with a relevant income of less than HK$6,500 per
month or HK$78,000 per year do not have to make contributions.
11. Contribution tables after the increase in the minimum level of relevant
income
(1) Regular employees
Monthly paid regular employees and their respective employers
Monthly relevant income
HK$
Mandatory contribution amount HK$
Employer’s contribution
Employee’s contribution
Less than 6,500 Relevant income x 5% Not required
6,500 - 20,000 Relevant income x 5% Relevant income x 5%
More than 20,000 1,000 1,000
12. What is the MPF ‘salary cap’
• MPF salary cap: Maximum income level employees
need to pay
• HK$20,000
• Employees earning up to HK$20,000 pay 5 percent of
their salary to the fund
• Employees earning more than HK$20,000 pay the
same maximum amount.
Source:
http://www.mpfa.org.hk/english/abt_mpfs/abt_mpfs_fms/abt_mpfs_fms_con/abt_mp
fs_fms_con.html
http://www.mpfa.org.hk/english/super/super_si/super_si_mie/files/Study_Notes_Eng.
pdf
http://mpf.hk/post/2011/11/24/MPF-contributions-cap-next-year-to-improve.aspx
http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=35508&sid=1161
1812&con_type=1&d_str=20070106
13. Q3.5 What is the difference
between an MPF trustee and an
MPF service provider?
14. MPF Service Provider and Trustee
MPF service provider
• consists of administrator, • Investment manager
investment manager,
custodian, and other person • provide services for the
appointed or engaged purposes of the scheme.
by the approved trustee
15. MPF Trustee
•Government approved •legally obliged to make all
provider trust-related decisions with
the beneficiary‘s interests in
•An individual or mind, and may be liable for
organization which holds damages in the event of not
and invests assets for the doing so.
benefit of employees.
16. How many MPF trustees are
registered with the MPFA?
17. MPF Trustee
The MPFA vets all trustees to ensure that
they meet the detailed requirements to be a trustee,
e.g. capital adequacy, independent directors, relevant
experience etc.
A trustee who has met all of these criteria and been approved
by the MPFA will be an approved trustee and can act as a
trustee for a master trust, an employer sponsored scheme or
an industry scheme.
19. Q3.6 What’s an MPF
Intermediary?
There are two types of MPF intermediary:
(i) “Corporate intermediary” ;
(ii) “Individual intermediary”
it means a person who is engaged in:
(i) selling MPF schemes; or
(ii) advising clients on constituent funds or underlying
approved pooled investment funds of MPF schemes.
20. How many are there?
as at November in 2011, there were about 30,000
registered MPF individual intermediaries in the market
around 12.5% were permitted to provide
recommendation on securities and insurance policy.
21. What do they do?
• approach the client
1
• understanding the client
2
• selling/advising on MPF schemes without
3 rendering specific investment advice
• after sale service
4
22. Who regulates them?
The MPFA acts as the lead regulator and coordinator
The MPFA relies on the three financial regulators in Hong
Kong: the Hong Kong Monetary Authority, the Securities
and Futures Commission and the Insurance Authority
24. Question 7
What is the Employee Choice Arrangement and why has
it been proposed?
25. Employee Choice Arrangement
Allows employees to choose the MPF provider as well as the
different types of MPF funds.
Aims at lowering the admin fees charged by MPF providers.
When there is more competition among MPF providers, it
creates pressure and forces the MPF providers to lower the
fees.
Originally scheduled to come into effect in April 2011
Government has postponed it and it is now expected to
come into effect in the second half of 2012
From: MPF Choice Put Back to July 2012.
http://topics.scmp.com/news/hk-news-watch/article/MPF-choice-put-back-to-July-2012
26. s c h e me
a n d i s
t h e r e
mo r e t h a n
o n e k i n d ?
27. MPF(Mandatory Provident
Fund ) scheme
suitable retirement protection system
a mandatory, privately managed, fully
funded contribution scheme
Compulsory saving scheme
Launched in December 2000
28. Types of MPF Schemes
Master Trust Schemes
Employer-sponsored Schemes
Industry Schemes
29.
30. Mixed Assets Fund
Bond Fund
Equity Fund
Guaranteed Fund
Money Market Fund-MPF Conservative
Fund
Others
31. Question 3.10
How has the MPF performed over the past year, over the
past five years, and/or since it was launched?
32. MPF Past Performance
Total net asset value of all MPF schemes: HK$365.4billion (as at
December 2010)
The average annual rate of return since inception (2000) is 5.4% (net of
admin fees)
Compared to the annualized composite CPI percentage for the same
period: 0.7%
33. MPF Past Performance
The average annual rate of return for different types of funds:
Types of funds Rate of return in Rate of return
2011 since inception
(2000)
Mixed Asset Fund 8.7% 4.9%
Equity Fund 10.2% 5.7%
MPF Conservative 0.0% 1.2%
Fund
Guaranteed Fund 2.2% 1.6%
Bond Fund 3.9% 3.9%
Money Market Fund -0.4% 0.8%
- Equity Fund consistently outperformed other funds.
- Money Market Funds performed the poorest.
Source: http://www.info.gov.hk/gia/general/201106/22/P201106220300.htm
34. Q3.11 What do the terms Fund Expense
Ratio (FER) and Fund Risk Indicator (FRI)
mean and how is each one calculated?
By Zephyr Chan and Yoyo Cheng
35. Fund Expense Ratio (FER)
A standard measure which indicates the total
amount of fees and expenses charged to a fund
Expressed as a percentage of the fund's net
asset value
May include management fees, safe custody and
bank charges, legal and other professional
fees, auditors' remuneration, compensation fund
levy to the MPFA, guarantee charges and other
expenses.
36. Fund Risk Indicator(FRI)
Describes the risk of one’s MPF fund
Measures that have been adopted is called
standard deviation
Is calculated over a three-year period
Shows the volatility of price as a percentage
around the average price over the measurement
period
37. Q12.
• When and by whom can accrued
benefits be withdrawn from a
member’s MPF?
38. When?
• retirement at age of 65
• early retirement at the age 60
• permanent departure from Hong Kong
Source: http://www.mpfa.org.hk/english/abt_mpfs/abt_mpfs_fms/abt_mpfs_fms_bp/abt_mpfs_fms_bp.html
39. By whom?
• total incapacity (certificate of a person's unfitness for a particular
kind of job with doctor note)
• death (note that the MPF will be regarded as part of the member's
estate and can be claimed by the personal representative of estate)
• small balance account of less than $5,000, no contributions made to
a scheme for 12 months, and declared not to become employed or
self-employed within the foreseeable future
Source: http://www.mpfa.org.hk/english/abt_mpfs/abt_mpfs_fms/abt_mpfs_fms_bp/abt_mpfs_fms_bp.html
40. QUESTION 3.13:
THE MPFA MAKES FOUR SUGGESTIONS
THAT PEOPLE SHOULD CONSIDER WHEN
IDENTIFYING THEIR RETIREMENT
INVESTMENT GOALS.
WHAT ARE THEY?
Presented by
Leafynn Tan
Leo Lam
41. REMEMBER TO:
Set clear investment goals
Assess your own risk tolerance level
Estimate your investment horizon
Adjust your investment portfolio at different life
stages
42. ADDITIONAL INFORMATION:
Achievable goals, tailored to your needs
MPF is a long term investment
Past performance of a fund is not a guide to its future performance
Source:
http://www.mpfa.org.hk/english/mpf_edu/mpf_edu_laymi/mpf_edu_laymi_uyn/
mpf_edu_laymi_uyn.html
43. Q3.14 What should
employees consider
when choosing MPF
funds?
http://www.mpfa.org.hk/tc_chi/mpf_edu/mpf_edu_laymi/mpf_edu_laymi.html
Hayes Chu
Caren Lam
45. Assessment of risk
Assessed according to your age, character,
personal and family member’s financial
status etc
If exposed to higher riskmore aggressive
investment portfolioreturn may be higher
faster to achieve your investment
objectives.
46. Investment period
Longer the investment period
ability to take risks are
relatively higher, vice versa
47. Other factors
Review the portfolio at your different
stages of life help improving your
investment efficiency.
Fund’s investrment objectives, tools
and assets.
Fund’s market risk
