The MPF was established in 2000 as part of a drive to ensure Hong Kong’s aging population saves enough for retirement. HK’s Information Services Department last year said the special administrative region of China had a “rapidly aging population” and projected that 65 year-olds would account for 17% of the population by 2017 and 28% by 2039.
Under the MPF, employees and employers are required to contribute 5% of the employee’s monthly income into an MPF scheme. Up until now, where this money was subsequently invested was entirely up to the employer.
As of today, under the Employee Choice Arrangement (ECA), employees are permitted, once each year, to move the portion to which they have contributed to another provider, although the employer still retains control, via a trustee, of the arrangement on behalf of the employee.
According to the MPF Schemes Authority (MPFSA), there are around 2.35 million employees paying into MPFs, creating a huge opportunity for advisers.
However, while enacting the ECA, the MPFSA has also introduced strict new regulations which mean anyone caught giving advice, without the proper registration, could face imprisonment and a significant fine.
The MPFSA said, under the new rules, all sales and marketing activities related to MPF schemes, as well as advice, will be regulated. Specifically, companies conducting MPF sales and marketing activities will have to register as Principle Intermediaries, while the employees and representatives will have to register as Subsidiary Intermediaries.
MPF intermediaries will be regulated by the MPFA, the Hong Kong Monetary Authority, the Insurance Authority and the Securities and Futures Commission (SFC).
Glenn Turner, chairman of Hong Kong’s Independent Financial Advisors Association, has broadly welcomed the new regime, noting that most observers, including the IFAA, believe the changes move the MPF “in the right direction”.
