MPF UPDATES FOR INSURANCE INTERMEDIARIES September 30, 2005.
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Transcript of MPF UPDATES FOR INSURANCE INTERMEDIARIES September 30, 2005.
MPF UPDATESFOR
INSURANCE INTERMEDIARIES
September 30, 2005
CONTENT Change in the MPF Market Basics for Employers and Employees Basics for MPF Individual Intermediaries Registration Issues Pertaining to MPF
Intermediaries Performance Presentation Standards for
MPF Investment Funds Cases Study
Change in the MPF Market
199 224
1639
1913
269 289
0200400600800
100012001400160018002000
ParticipatingEmployer
ParticipatingEmployee
Self - employedPerson
Feb. 28, 2001Jun. 30, 2005
Source: The MPFA
(‘000)
25
274
20
Change in the MPF Market No. of
Approved Trustee
No. of Registered Schemes
No. of Approved Constituent Funds
Feb. 28, 2001 20 51 299
Jun. 30, 2005 19 47 328
Source: The MPFA
Change in the MPF Market
11560
131496
0
20000
40000
60000
80000
100000
120000
140000
Feb. 28, 2001 Jun. 30, 2005
Aggregate Net AssetValue of All Schemes
HK$million
Source: The MPFA
119,936
Change in MPF Market
Corporate Individual
Feb. 28,2001
471 30,660
Mar. 31,2005
432 24,152
No. of Registered Intermediaries
Source: The MPFA
Basics for Employers & Employees
Monthly Relevant Income Minimum: HK$5,000 Maximum: HK$20,000 Contribution rate for employees
Employer: 5% Employee: 5% Contribution rate for self - employed person
5%
Mandatory Contribution
Example Monthly Relevant Income: HK$4,000 Employer’s Mandatory Contribution Employee’s Mandatory Contribution
HK$200
HK$0
Relevant Income any items paid in monetary terms paid or
payable by an employer to an employee in consideration of the employment contract
but exclude any housing allowance & housing benefits, any severance or long service payment
Permitted Period The period within which an employer must
enroll his employees in an MPF scheme, I.e. 60 days of their employment
for casual employee, the permitted period is the first 10 days regardless of the type of scheme in which he is enrolled
Contribution Day Employers are required to pay mandatory
contributions to the scheme’s trustee on or before the contribution day
for employees: 10th day after the last day of a calendar month
for casual employees not members of an industry 10th day after the last day of the relevant
contribution period
Contribution Day for causal employees in an industry scheme
the next working day (other than Saturday) immediately after the payment of relevant income for the relevant contribution period or
the 10th day after the last day of the relevant contribution period
Contribution Payment Employer is required to make contribution
for the employee from the first day of such employment
employee is not required to contribute for the first 30 days of employment and any wage period / calendar month commencing on or before the 30th day of employment
Contribution Documents Remittance Statements Monthly pay - record
the employee’s relevant income mandatory & voluntary contribution amount
by employer & employee respectively date of contribution payment to the trustee
Example Monthly Relevant Income: HK$30,000 Employer’s Mandatory Contribution: Employee’s Mandatory Contribution:
HK$1,000
HK$1,000
Tax Allowance Mandatory contribution by an employee
are tax deductible, maximum of HK$12,000 per year
Mandatory contribution by an employer are tax deductible.
MC + VC / contribution to an ORSO scheme are deductible up to 15% of total yearly emoluments of the employees
Default Contribution ===> Contribution surcharge:
at a flat rate of 5% of the amount of mandatory contribution in arrears
===> Financial penalty at the higher of HK$5,000 or 10% of the
amount of mandatory contribution in arrears
Offences For employers
A fine of HK$100,000 & to imprisonment of 6 months on the first occasion
each subsequent occasion, the fine is HK$200,000 & the imprisonment is 12 months
Offences for self - employed person
a fine of HK$50,000 & to imprisonment for 6 months on the first occasion
each subsequent occasion, the fine is HK$100,000 & the imprisonment is 12 months
Benefits Withdrawal attain the retirement age of 65 early retirement after reaching the age of 60 Permanent departure from Hong Kong once in a person’s lifetime Death Total incapacity Small balance account >HK$5,000 & no mandatory contribution in the
past 12 months
Long Service Payment / Severance Payment The employer is entitled to offset the LSP /
SP out of the accrued benefits derived from the contributions made by the employer in respect of the employee in the MPF scheme
Coverage Employees
a person engaged by an employer under an employment contract & to whom the Employment Ordinance applies
have been employed for 60 days location of work & number of hours worked are
irrelevant. both the employee & employer are required to
contribute 5% of the employee’s relevant income
Coverage Casual employees
any person employed in the selected industries by an employer on a day - to day basis or for a fixed period of less than 60 days
only catering & construction industries for non - daily paid casual employees:
both the employee & employer are required to contribute 5% of the employee’s relevant income
Coverage Casual employees
for daily - paid casual employees in an industry scheme follow this table:
Coverage
Daily Contribution(HK$)
Employer’sContribution
Employee’sContribution
Below 160 7.5 N.A.
160 – 259 7.5 7.5
260 – 389 15 15
390 – 519 22.5 22.5
520 – 650 30 30
Over 650 30 30
Scale of contribution for daily - paid casual employees in an industry scheme
Coverage Self - employed person
any person whose relevant income (otherwise than in the capacity as an employee) is derived from his production of goods or services in Hong Kong, or his trade in goods or services in or from Hong Kong
example: sole proprietor or a partner of a partnership make contribution regardless of whether they have
filed tax returns or obtained business registration
Coverage Exempted person
employees & self - employed persons who at the date the MPF system is implemented , I.e. Dec. 1, 2000 have attained the age of 64.
Domestic Helper Self - employed licensed hawker
Coverage Exempted person
people covered by statutory pension & provident fund schemes, e.g. civil servants & subsidized or grant school teachers
people from overseas who enter Hong Kong for employment for 13 months or less
people from overseas & are covered by overseas retirement schemes
Coverage Exempted person
employees of the European Union Office of the European Commission in Hong Kong
members of an MPF exempted ORSO schemes
Employers any person who has entered into a contract
of employment to employ another person as his employee
are required to enroll their employees who have been employed for 60 calendar days to an MPF scheme
display the certificate issued by the MPFA at the premises
Employers Enroll causal employees in the catering &
construction industries in an MPF scheme regardless of the duration of employment
Types of MPF Schemes Employer Sponsored Scheme
open only to the relevant employees of a single employer & its associates
high setup cost only cost effective for large companies more control on choice of service providers &
funds
Types of MPF Schemes Master Trust Scheme
open to the relevant employees of different employers, self - employed persons & deferred members
high degree of efficiency from economies of scale
Types of MPF Schemes Industry Scheme
specially designed for industries with high labor mobility & daily wage practice
for catering & construction industries optional for employers in these 2 industries to
enroll their employees in such a scheme
Basics for MPF Intermediaries
MPF Intermediary selling MPF schemes advising clients on constituent funds or
underlying approved pooled investment funds of MPF schemes
corporate intermediary individual intermediary not include a professional whose act of giving
advice is wholly incidental to the practice of his profession, e.g. lawyer
Regulatory Framework Objectives
minimizing the risks of mis - selling maximizing protection for scheme members
uses decentralized & coordinated approach relying on the following regulators:
the Monetary Authority the Securities and Futures Commission the Insurance Authority & the 3 self - regulatory
organizations
Regulatory Framework 3 SROs:
The Hong Kong Federation of Insurers The Hong Kong Confederation of Insurance Brokers The Professional Insurance Brokers Association
Limited
The MPFA the leading regulator registering & monitoring MPF intermediaries
Fit & Proper Criteria A person is not fit & proper if he:
has been found by a court to have acted fraudulently or dishonestly, has been convicted of a criminal offence
bankrupt has been denied membership or registration
of any professional or regulatory body cannot fulfill the CPD requirement
Role of MPF Intermediaries Prospecting
identify himself provide information of the corporation he
represents explanation
Understand the client’s needs
Role of MPF Intermediaries Selling / Advising
explain the key features give offering documents, e.g. Principle Brochure &
marketing materials to the client clearly explains details of any guaranteed funds give advice only if relevant license is valid, I.e.
insurance or security ensure information is not deceptive avoid conflict of interest
Role of MPF Intermediaries make sure the client make all payment to the
trustee do not accept cash
After sales services handling enquiries & complaints
Registration Issues Pertaining to MPF Intermediaries Effective October 1, 2005
the MPFA will issue MPF Intermediary Certificate instead of the MPF Card
MPF individual intermediaries must identify himself by showing business cards bearing the MPF registration number
waiving return of expired & outdated MPF Cards / Certificates
Registration Issues Pertaining to MPF Intermediaries Alignment of expiry date of corporate and
individual intermediaries compliance with Continuing Professional
Development (CPD) requirement one of the criteria in assessing the fitness &
properness of applicants & registrants
Performance Presentation Standards for MPF Investment Funds
To specify methods for presenting: fund performance information fund risk indicators fund descriptor
To present scheme members with actual, historical information on the performance of MPF funds.
Performance Presentation Standards for MPF Investment Funds
The period since launch 1 year, 5 year & 10 year No return figures for the period since launch
if track record < 6 months. No return figures for the period since launch
if the period of since launch > 10 years. Rate of return < 1 year, NO annualized
figures.
Performance Presentation Standards for MPF Investment Funds
Guaranteed Fund the following information must be disclosed
in the fund fact sheet: guarantor guaranteed rate conditions for the guarantee (if applicable)
Performance Presentation Standards for MPF Investment Funds
Calculation of fund performance a fixed formula use Net Asset Value
Calculation of fund risk indicators use Annualized Standard Deviation based on the monthly rate of return of the
fund over the past 3 years. Not applicable for guaranteed fund.
Performance Presentation Standards for MPF Investment Funds
Standards for Fund Descriptor types of assets types of non - cash assets the maximum exposure to equity geographical region
Performance Presentation Standards for MPF Investment Funds
Descriptor to be used: Mixed Assets Fund - [region] - max. equity [%]
lifestyle or balanced fund
Equity Fund - [region] Bond Fund - [region] Money Market Fund - [region]
Capital Preservation Fund
Guaranteed Fund - [guarantee features] Uncategorised Fund - [region]
Fund Choices Geographical
Global North America Europe Japan Asia Pacific ex Japan Hong Kong Korea Greater China
Fund Choices Lifestyle
Capital Preservation As per the MPF Ordinance requirement
Guaranteed Soft Hard
Capital Stable (20 - 40% Equities) Stable Growth (40 - 60% Equities) Balanced (60 - 80% Equities) Growth (80% + Equities)
Fund Choices Type of Investment
Money Market Fixed Income Equities
Fund ChoicesFeb. 28, 2001 Jun. 30, 2005
Balanced Fund 46% 51%
Equity FundEquity Fund 15% 17%
Capital Preservation Fund 15% 15%
Guaranteed Fund 21% 15%
Bond FundBond Fund 1% 1%
Money Market Fund 2% 1%
Source: The MPFA
Fund Performance Unit to Unit
Example
Unit Price
Dec. 1, 2000 May 31, 2005
HK$100 HK$111.12
1 - year cumulative performance since launch: 11.12
Fund Performance Cumulative Interim Rate
Declare monthly interest rate
Fund Performance Dollar Cost Averaging
Example
Month Contribution Unit Price Unit BoughtJan. 1,000$ 100$ 10Feb. 1,000$ 80$ 12.5Mar. 1,000$ 110$ 9.09Total 3,000$ 31.59Unit Cost 94.96$ Net Asset Value as of Mar. 3,475.00
Case Study Case 1
Total salary of a security guard was HK$5,500. The employer had revised his employment
contract 3 times resulting in different salary structure.
Breakdown: housing allowance: HK$3,000 basic salary & hardship allowance: HK$2,500
Case Study Case 1
The MPFA found this case unacceptable The complainant’s consent to act as
prosecution witness The employer was fined HK$12,000
Case Study Case 2
2 Directors were responsible for the company’s MPF contribution arrangement
Delay MPF contribution payment to trustee after making deduction from the income of an employee between May 2004 & January 2005
Each was fined HK$13,600
Case Study Case 3
an employer had default contribution for a long time
do follow the order of the court the MPFA discovered that the employer
owned a private car under his name the MPFA with the Bailiff to get car the employer appeared & got cash from ATM
Question 1 What is the employer & employee’s
contribution for an employee with monthly relevant income of HK$30,000?
A. HK$1,000 B. HK$3,000 C. HK$2,000 D. HK$ 6,000
Question 2 Does a wife of a director working in his
limited company & receiving income need to have MPF coverage?
A. Yes B. No
Question 3 Which of the following person is exempted
from the MPF Ordinance? A. Part-time worker B. Home driver C. Taxi driver D. Domestic Helper