The government’s plans to make changes to the Mandatory Provident Fund (MPF) scheme allowing local workers the chance to choose their own trustees has been postponed indefinitely, it was confirmed Thursday.
Under Secretary for Financial Services and the Treasury Julia Leung said in a radio program that the plan, known as the Employee Choice Arrangement (ECA), has been postponed as the government needs more time to regulate the MPF intermediaries. The new scheme had been set for a 2011 launch after the Legislative Council passed the Mandatory Provident Fund Schemes (Amendment) Bill 2009 in July last year.
The ECA would have allowed local employees to switch fund managers once a year for their MPF contributions. It was thought the new scheme would give employees the chance to obtain better investment services and a reduction in service charges.
Speaking on the radio program Thursday, Leung said that the government will publish consultation papers on regulating MPF intermediaries at the end of this year or early next year.
"In addition, the government wants to delineate the regulatory responsibilities of the Hong Kong Monetary Authority, the Securities and Futures Commission and the Office of the Commissioner of Insurance more clearly before the ECA is implemented," Leung said.
A Mandatory Provident Fund Authority (MPFA) statement released Thursday said that in order to enhance the protection of the interests of over 2 million employees, it has proposed to reinforce the existing regulatory regime of MPF intermediaries through legislation. The government has agreed to the proposal and the MPFA hopes the legislation can be introduced in 2011.
It also said that the government and the MPFA will, in consultation with other regulators, discuss the details of the legislative framework.
"In the process, we will listen to the views of the industry," the statement added.
Legislator Chan Kin-por (Insurance) told China Daily that it is appropriate for the government to take time to regulate the MPF intermediaries to protect employees.
"The current MPF Code of Conduct for Administration of Intermediaries essentially lacks legal backing," Chan said. "So any license revocation against MPF intermediaries may be challenged by judicial review. If the government wants to give better investor protection for local employees by regulating MPF intermediaries, it needs time to establish a regulatory framework."
One MPF industry leader, however, said he is not overly disappointed by the postponement of the ECA plan as their business strategy will focus on MPF preserved accounts instead – the accrued investment benefits that employees keep after they change jobs.
"With the MPF scheme nearly 10 years old, many employees have accumulated preserved accounts," said Thomas Chan, chief executive officer at BOCI-Prudential Trustee Ltd. "The assets they hold are huge and offer more business potential to us."