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Capitalize on MPF in the Quest for Talents
Cheng Yan-cheeChief Corporate Affairs Officer and Executive Director
Mandatory Provident Fund Schemes Authority7 September 2018
Contents
2
Problem in Staff Recruitment and Retention
MPF as a Relevant Tool
Proposed Changes to Make MPF More Relevant
Attract Talents with MPF Voluntary Contribution
Attract Talents by Giving Support to MPF Selection & Management
1
2
3
4
5
Capitalize on Electronic MPF Administration
6
Problem in Staff Recruitment and Retention
4
Are you an Employer of Choice?
What benefits package do you offer?
Questions for Employers
5
Hong Kong’s Declining Unemployment Rate over the Past 10 years
%
Employers are facing a challenging environment to compete for talents
Keen Competition for Talents
6
Recruitment and retention of high-quality staff is essential
Offering better employee benefits gives you a competitive
edge on recruiting / retaining good staff
A better benefits package, including retirement benefits, can
improve retention and cut down on costs of turnover in the
long term, such as
• cost of the recruitment process
• onboarding & training
• lost productivity and mistakes
• lost revenue and broken relationships
• morale
Good Benefits Package vs Turnover Cost
MPF as a Relevant Tool
8
The MPF System is helping the Hong Kong working population to accumulate retirement savings
MPF - Performance
MPF Benefits and Contributions(1.12.2000 – 30.6.2018)
9
0
100
200
300
400
500
600
700
800
900
Accrued Benefits Total Net Contributions Received
HK
$ B
illio
n
852
600.62
Contributions(net of amount
withdrawn)$600.62 billion
30%
Investment Returns(net of fees & charges)
$251.38 billion
Annualized rate of return since inception (net of fees & charges)
(1.12.2000 – 30.6.2018)
MPF Investment Returns
10
-4.9%-10.7%
22.0%
4.7%12.3% 12.4%
4.5%
-25.9%
30.1%8.7%
-5.6%
6.4% 4.2% 6.4%
-8.2%
9.7%14.9%
-1.9%*
1.12.2000-
31.3.2002
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
MPF Investment Returns by Fund Type
Fund type
Dec 2000 to Jun 2018
Annualizedreturn
Cumulativereturn
Equity Fund 5.2% 141.9%
Mixed Assets Fund 4.4% 112.8%
Bond Fund 2.6% 56.4%
Guaranteed Fund 1.2% 22.4%
Money Market Fund -Other than MPF Conservative Fund
0.6% 10.3%
Money Market Fund -MPF Conservative Fund
0.7% 13.2%
11
Proposed Changes to Make MPF More Relevant
Maximum Relevant Income Level
Tax Concession for MPF Voluntary Contribution
Review of Minimum and Maximum
Relevant Income Levels
14
MPFA is required by law to regularly review the Min &
Max RI levels
Completed the current review and has submitted the
report to the Government for consideration
Minimum and Maximum Relevant Income (Min & Max RI) Levels
15
According to the statutory adjustment factor:
Min RI should be adjusted from
$7,100 to $8,250 (?) (half of Median Earning)
Max RI should be adjusted from
$30,000 to $48,000 (?) (90th Percentile Earning)
Proposed Min & Max RI Levels
3,580,000
2,237,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Investment Horizon / Year
Max RI at $48,000
Max RI at $30,000
$
16
Projection of Accrued Benefits
Estimated Final Accrued Benefits of Scheme Members
An increase in Max RI would improve significantly a scheme member’s accrued benefits over the long term
Key Assumptions• Annualized Investment Return = 4.4% (i.e.: Annualized IRR of MPF System as at July 2018 since inception)• Assuming the member contributes at Max RI for 30 years from 35 years of age, while the Max RI is not further adjusted• Current MPF account balance = $0
Increase: $1,343,000
(60%)
(?)
17
For MPF to effectively perform its retirement protectionfunction, adjustment over time to reflect incomedistribution of workforce is necessary
This will assist employees to accumulate enough MPF forbasic retirement protection
Labour unions welcome the proposal
Employer’s Support
Employers’ support for increasing Max RI will keep MPF as a relevant tool for
staff recruitment and retention
Proposed Tax Concession for MPF Voluntary Contribution
19
Mandatory Contribution(MC)
Voluntary Contribution(VC)
Tax Deductible Voluntary Contribution(TVC)
Existing tax concession limit of $18,000
Proposed tax concession limit of $36,000
No tax concession
The Proposal
20
Voluntary Contribution (VC) by Employees
2017: 83,000 or 3.2% of all participating employees made $1,373 million
to their MPF schemes as VC
81800
82000
82200
82400
82600
82800
83000
83200
2015 2017
Number of Employees Paid Voluntary Contribution for Themselves
21
Tax concession will encourage moreemployees to make more contribution forretirement planning in addition to thecurrent mandatory contribution
Employers are encouraged to provide VC tomatch the employee's TVC as part of theirbenefits package
Employers Can Boost the Effect of TVC
Attract Talents with MPF Voluntary Contribution
23
More and more employers and employees see the valuein making MPF VC to strengthen retirement benefits
Some employers make VC for their employees (ER-VC)on top of mandatory contributions (MC)
Some employees also make VC through their employers(EE-VC), sometimes as a prerequisite for employers’matching contribution
Upward Trend of Voluntary Contribution
24
0
2000
4000
6000
8000
10000
12000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total VC Received
Total VC
Received for
Employees
Upward Trend of Voluntary Contribution
The amount of VC has grown substantially over the years
MPF Voluntary Contribution
25
Upward Trend of Voluntary Contribution
In 2017, a total of 15 900 employers (or 5.6% of all participating employers) made ER-VC for 328 500 employees (or 12.5% of all participating employees) with an aggregate amount of $8,894 million
15740
15760
15780
15800
15820
15840
15860
15880
15900
15920
2015 2017
Number of Employers Paid Voluntary Contribution for Employees
250000
260000
270000
280000
290000
300000
310000
320000
330000
340000
2015 2017
Number of Employees Received Voluntary Contribution from Employers
Average amount of ER-VC per employee in 2017was $27,100
Employers that provide VC improve significantlyan employee’s accrued benefits over the longterm
26
Employers can EnhanceRetirement Protection for Employees
4,947,000
3,921,000
3,263,000
2,237,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Investment Horizon / Year
MC + ER-VC + EE-VC
MC + ER-VC
MC + EE-VC
MC
$
27
Increase: $2,710,000 (121%)
Increase: $1,684,000 (75%)
Increase: $1,026,000
(46%)
Key Assumptions / Parameters • Annualized Investment Return = 4.4% (i.e.: Annualized IRR of MPF System as at July 2018 since inception)• Assuming the member contributes at Max RI ($30,000) for 30 years from 35 years of age, while the Max RI is not further adjusted• Current MPF account balance = $0• Average Amount of EE-VCs Per Employee in 2017 = $16,500• Average Amount of ER-VCs Per Employee in 2017 = $27,100• All ER-VC are vested fully and immediately in the employee
Projection of Accrued Benefits
Join the 15 900 employers currently providing ER-VC to employees
28
Be an Employer of Choice
Attract Talents by Giving Support to MPF Selection and Management
30
Employers can give support to their employees in MPF management through:
Organizing MPF talks for employees
Providing employees with information about their MPF scheme(s)
Disseminating the latest information on the MPF System to employees
Assisting employees in consolidating MPF accounts
Assisting employees in utilizing Employee Choice Arrangement (ECA)
Offering more than one MPF scheme for employees to choose from
Choosing MPF schemes on the basis of “value for money”
Examples of What Employers Can Do
31
Employers are responsible for selecting suitable
trustee(s) and scheme(s) based on the needs of the
company and its employees
Employees expect MPF schemes and trustees to
deliver “value for money” for their retirement savings
Employers play a vital role in ensuring value for
money at scheme level so as to enhance the MPF
benefits for employees
Value for Money
32
Employers should consider the following factors whenevaluating trustees / schemes: Range and quality of the services Choices of schemes and funds Fees of funds Performances of schemes and funds
Resources on MPFA’s website to help employerscompare different trustees and schemes Trustee Service Comparative Platform Fund Performance Platform
Resources to Help Employers
33
Fund Performance Platform
34
Compare MPF schemes by comparing the funds they offer
Using the filtering function, employers can view and compare the fees, risk
levels, returns and fund size of selected funds from different MPF
schemes of their choice in a single table
Fund Information Table
35
Helps you to review the performance of selected funds for long-term periods (5 / 10
years) in the form of chart
Here are the 5-year and 10-year low-to-high annualized returns of the selected funds
by fund type or fund category (Global Bond Fund of 3 different schemes are chose)
Each star represents one fund
Move your mouse cursor on the colour-coded star to view its return
If the star is paced to the left, it means the fund performs relative poorly
Performance Chart
36
Allows you to compare the key features of selected funds in the familiar
table format commonly used to compare products
You can select funds of different MPF schemes for comparison
Showing their returns, fees and risk levels for easy comparison
My Selection
Capitalize on Electronic MPF Administration
38
Payment of MPF contributions by electronic means insteadof paper cheque will save the delivery time and avoid disputeon payment date
Preparing and submitting remittance statement by e-toolswill reduce manual processing which will help ensureaccuracy and avoid default contribution caused bycalculation errors
Avoid paying surcharge on default contributions
Avoid default contribution causing grievance among staff
Reduce paper-based transactions, lower the operating costsof MPF schemes
It is also environmental friendly
Benefits of Using Digital Means
39
Trustees are providing different e-services to facilitate employers / HR practitioners to handle MPF-related matters
Trustees are prepared to offer employers / HR practitioners assistance in using their e-services
Seek Assistance from Trustees
Upcoming
MPF Scheme Administration
Reform
MPF Scheme Administration
32 MPF schemes privately managed by 14 trustees
9.6 million MPF accounts
• 4 million contribution accounts and 5.6 million personal accounts
Administration cost and expenses accounted for 43% of FER -2012 Study
2 reasons for high scheme administration costs
• 30 million transactions yearly, 2/3 involve manual/paper
• Not enough co-operation to resolve industry-wide problems
41
MPF Scheme Administration
Using digital means to handle MPF-related matters is the way to go
42
eMPFthe upcoming reform
Objectives
eMPF
43
1Improve
accuracy, reliability and
efficiency
2
43
Lower costs and
fees
Enhance user experience
Enable future reform
eMPF
Proposed Centralized Infrastructure
One-stop access
Standardization, streamlining and automation
Central hub for processing employers’ and employees’ instructions or transactions to trustees
Enable “Full Portability”
44
Conclusion
To capitalize on MPF for enhancing employee benefits to
help in the quest for talents
45
End