It's going to be a big year for the SAR's retirement funds industry. While the end of the millennium will be a momentous occasion, pension-fund providers are gearing up for their big day at the end of next year when the much-awaited Mandatory Provident Fund (MPF) scheme is scheduled to begin. The start date can't happen soon enough for most Hong Kongers. After years of debate that ranged from issues about its timing, contribution levels and the number of choices down to plain old political posturing and self-interested stubborn resistance from recession-ravaged employers, we are now nearing implementation. But with just 12 months to go, just how prepared are all would-be participants? From the Government's perspective, preparations are going reasonably smoothly, with a number of senior management positions in the scheme's regulator being filled in recent months and the announcement of a publicity and public-education campaign to commence early next year. On the service-provider side, a number of strategic developments in the second half of this year have brought the potential MPF market composition more sharply into focus. The Bank Consortium Trust of 10 SAR banks was formed, while alliances between Jardine Fleming and AIA, Bank of China and Prudential, and between Schroders, Aetna and HSBC have shifted the balance of market power somewhat. But while these powerful couplings should be able to grab sizeable share, other firms appear to be struggling to come to terms with the financial commitment needed to be competitive players in the MPF market. The announcement of a public-education campaign to start next month is not before time. For most of last year, industry observers expressed concern about the public's MPF awareness level and the alarming fact that many employers seemed oblivious of their obligations to staff. Many of those who will be affected by the scheme - employers and employees - are ignorant of the implications of MPF, and a number of issues need to be clarified quickly. One of these is the issue of contributions. Employers - often with robust support from politicians - have complained they will be forced to pay their workers an extra 5 per cent in wages to cover their MPF obligation. However, with many businesses near the margin having been ravaged by two years of financial hardship, employers have no intention of doing this in reality. Therefore, they have two options: lay off staff to cover the MPF costs, or simply deduct 5 per cent from their employees' take-home pay and use that as the contribution. Unions have rather gloomily predicted that businesses will choose the first option, with middle-management types likely to be in the firing line. But others suggest the 5 per cent decrease in pay is more likely, with employers then able to claim that the economic environment makes what would effectively be a 5 per cent pay rise unacceptable. All this means that employees must also be educated about the implications of MPF, specifically that from December next year, they face being up to 10 per cent worse off each week - taking into account their own 5 per cent contribution - but that in the process, they will be building their retirement income through what is essentially compulsory saving. Workers also face having to make fund choices: whether to opt for low-risk, low-return capital preservation products - so reviled by the industry - or whether to go for higher-risk, higher-return funds. Most of these should be relatively straightforward if people are able to make informed decisions. The grave doubts held by many in MPF-related industries since the implementation timetable was announced have not diminished, particularly in light of recent surveys showing less than 25 per cent of employers have started to look at their MPF strategy. Obviously it is too early to judge the effectiveness of the awareness-raising campaign. But unless it works well, the MPF may yet experience some hiccups come December next year.