The proposal to boost employee control over their investment in mandatory provident funds will promote market competition, keeping fees and charges at a reasonable level, Hong Kong's Financial Services & the Treasury Bureau suggested this week.
The MPF Schemes Operation Review Committee and the MPF Schemes Advisory Committee
have considered and endorsed the proposal. Legislative revisions may be tabled
to lawmakers in the next legislative session, it revealed.
According to the Mandatory Provident Fund Schemes Authority's proposal, employees
will be allowed to decide whether they will transfer on a lump-sum basis all
accrued benefits derived from their employee mandatory contributions from the
employer chosen schemes to an MPF scheme of their own choice at least once a
year.
The proposal aims to benefit employees while avoiding proliferation of transfers
and small-balance accounts. The risk of possible errors due to frequent transfers
can be cut.
The proposal will also allow employees access to a broader spectrum of MPF service
providers, schemes and investment funds for investment of mandatory contributions
that they make during their employment. Upon implementation, the proposal will result
in 60% of MPF benefits being portable between trustees.
The Authority has stated that the proposed new arrangement will not add undue burden with regard to trustees' administrative duties, while the transfer of employee mandatory
contributions will not require employers to change their administration systems.
Taking into account the lead-time that trustees require to make necessary adjustments
and other preparations, the Authority hopes that the proposal will be implemented
within a year after the legislative exercise is completed.
As a corollary of the proposal, the authority will rename "preserved accounts"
as "personal accounts", which it hopes will instil in employees a greater sense
of MPF account ownership.
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