Preparing members for launch of ECA
The Mandatory Provident Fund Schemes Authority stepped up its investment-focused educational initiatives in recent years to prepare the working population to take greater control of the management of their pensions.
'These initiatives will help prepare employees for the launch of the employee choice arrangement (ECA), which will give MPF scheme members the option of transferring their accrued benefits from their own mandatory contributions to a trustee of their choice. It will also help employees address their accumulating wealth, and the ageing population plan better for their long-term retirement,' Cynthia Hui Wai-yee, the MPFA's executive director (supervision), said.
In the last financial year the aggregate net asset value of all MPF schemes reached HK$317.3 billion, up 46 per cent from the same period a year earlier. There are currently 19 approved trustees and 38 registered schemes.
The launch of the ECA will depend on the strengthening of existing regulations governing MPF intermediaries. A public consultation on the issue is scheduled for the end of the year or early next year with the hope that legislation to tighten regulations will be passed next year.
'We expect the launch of the ECA will trigger more selling activities to individuals. [To protect] scheme members, we think it is a better and more prudent approach to strengthen our supervision of intermediaries first,' she said.
The authority will also provide guidance to financial intermediaries on selling and marketing activities, and train them on proper selling conduct. It will complete its current round of on-site visits to all trustees and investment managers of MPF funds, and develop best practices on investment compliance arrangements.
Retirement planning is as important as ever. A surge in the proportion of people over the age of 60 is being accompanied worldwide by a decline in the proportion of young people - that is, those aged under 15 - in the population, according to the UN's Economic and Social Affairs Population Division.
This means that, by 2050, the number of older people in the world will, for the first time in history, exceed the number of young people. That has impacts for the Chinese tradition of depending on the younger generation in retirement. This phenomenon has underscored a shift in mindset, Hui says. 'People have recognised and accepted the fact that they may not and cannot depend on their offspring in retirement.'
The authority's initiatives have helped many to plan better for their retirement. The regulator's latest campaign focused on explaining the six major decision points at different stages of the lifelong MPF investment process, Hui said. These included how best to choose funds and an MPF scheme, whether to make additional contributions, how to handle MPF accrued benefits during an employment change, when and how to adjust MPF fund choices and what to do with MPF benefits upon retirement.
