Capitalize on MPF in the Quest for Talents

Transcription

1 Capitalize on MPF in the Quest for Talents Cheng Yan-chee Chief Corporate Affairs Officer and Executive Director Mandatory Provident Fund Schemes Authority 7 September 2018

2 Contents 1 Problem in Staff Recruitment and Retention 4 Attract Talents with MPF Voluntary Contribution 2 MPF as a Relevant Tool 5 Attract Talents by Giving Support to MPF Selection & Management 3 Proposed Changes to Make MPF More Relevant 6 Capitalize on Electronic MPF Administration 2

3 Problem in Staff Recruitment and Retention

4 Questions for Employers Are you an Employer of Choice? What benefits package do you offer? 4

5 Keen Competition for Talents Employers are facing a challenging environment to compete for talents % Hong Kong s Declining Unemployment Rate over the Past 10 years 5

6 Good Benefits Package vs Turnover Cost 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 6

7 MPF as a Relevant Tool

8 MPF - Performance The MPF System is helping the Hong Kong working population to accumulate retirement savings 8

9 HK$ Billion MPF Benefits and Contributions ( ) Contributions (net of amount withdrawn) $ billion Investment Returns (net of fees & charges) $ billion 30% Accrued Benefits Total Net Contributions Received 9

10 MPF Investment Returns Annualized rate of return since inception (net of fees & charges) ( ) 22.0% 4.7% 12.3% 12.4% 4.5% 30.1% 8.7% 6.4% 4.2% 6.4% 9.7% 14.9% -4.9% -10.7% -25.9% -5.6% -8.2% -1.9%*

11 MPF Investment Returns by Fund Type Fund type Annualized return Dec 2000 to Jun 2018 Cumulative return 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 Money Market Fund - MPF Conservative Fund 0.6% 10.3% 0.7% 13.2% 11

12 Proposed Changes to Make MPF More Relevant Maximum Relevant Income Level Tax Concession for MPF Voluntary Contribution

13 Review of Minimum and Maximum Relevant Income Levels

14 Minimum and Maximum Relevant Income (Min & Max RI) Levels 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 14

15 Proposed Min & Max RI Levels 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) 15

16 Projection of Accrued Benefits An increase in Max RI would improve significantly a scheme member s accrued benefits over the long term Estimated Final Accrued Benefits 4,000,000 of Scheme Members 3,500,000 3,000,000 2,500,000 $ 2,000,000 Max RI at $48,000 Max RI at $30,000 (?) 3,580,000 2,237,000 Increase: $1,343,000 (60%) 1,500,000 1,000, , Key Assumptions Investment Horizon / Year 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 16 Current MPF account balance = $0

17 Employer s Support For MPF to effectively perform its retirement protection function, adjustment over time to reflect income distribution of workforce is necessary This will assist employees to accumulate enough MPF for basic retirement protection Labour unions welcome the proposal Employers support for increasing Max RI will keep MPF as a relevant tool for staff recruitment and retention 17

18 Proposed Tax Concession for MPF Voluntary Contribution

19 The Proposal Mandatory Contribution (MC) Voluntary Contribution (VC) Tax Deductible Voluntary Contribution (TVC) Existing tax concession limit of $18,000 No tax concession Proposed tax concession limit of $36,000 19

20 Voluntary Contribution (VC) by Employees Number of Employees Paid Voluntary Contribution for Themselves : 83,000 or 3.2% of all participating employees made $1,373 million to their MPF schemes as VC 20

21 Employers Can Boost the Effect of TVC Tax concession will encourage more employees to make more contribution for retirement planning in addition to the current mandatory contribution Employers are encouraged to provide VC to match the employee's TVC as part of their benefits package 21

22 Attract Talents with MPF Voluntary Contribution

23 Upward Trend of Voluntary Contribution More and more employers and employees see the value in 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 23

24 Upward Trend of Voluntary Contribution Total VC Received for Employees MPF Voluntary Contribution Total VC Received The amount of VC has grown substantially over the years 24

25 Upward Trend of Voluntary Contribution Number of Employers Paid Voluntary Contribution for Employees Number of Employees Received Voluntary Contribution from Employers In 2017, a total of employers (or 5.6% of all participating employers) made ER-VC for employees (or 12.5% of all participating employees) with an aggregate amount of $8,894 million 25

26 Employers can Enhance Retirement Protection for Employees Average amount of ER-VC per employee in 2017 was $27,100 Employers that provide VC improve significantly an employee s accrued benefits over the long term 26

27 Projection of Accrued Benefits $ 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 MC + ER-VC + EE-VC MC + ER-VC MC + EE-VC MC 4,947,000 3,921,000 3,263,000 2,237,000 Increase: $2,710,000 (121%) Increase: $1,684,000 (75%) Increase: $1,026,000 (46%) 1,500,000 1,000, , Key Assumptions / Parameters Investment Horizon / Year 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, All ER-VC are vested fully and immediately in the employee

28 Be an Employer of Choice Join the employers currently providing ER-VC to employees 28

29 Attract Talents by Giving Support to MPF Selection and Management

30 Examples of What Employers Can Do 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 30

31 Value for Money 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 31

32 Resources to Help Employers Employers should consider the following factors when evaluating 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 employers compare different trustees and schemes Trustee Service Comparative Platform Fund Performance Platform 32

33 33 Fund Performance Platform

34 Fund Information Table 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 34

35 Performance Chart 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 35

36 My Selection 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 36

37 Capitalize on Electronic MPF Administration

38 Benefits of Using Digital Means 38 Payment of MPF contributions by electronic means instead of paper cheque will save the delivery time and avoid dispute on payment date Preparing and submitting remittance statement by e-tools will reduce manual processing which will help ensure accuracy and avoid default contribution caused by calculation errors Avoid paying surcharge on default contributions Avoid default contribution causing grievance among staff Reduce paper-based transactions, lower the operating costs of MPF schemes It is also environmental friendly

39 Seek Assistance from Trustees 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 39

40 Upcoming MPF Scheme Administration Reform

41 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 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

42 MPF Scheme Administration Using digital means to handle MPF-related matters is the way to go empf the upcoming reform 42

43 empf Objectives 1 Improve accuracy, reliability and efficiency 2 Lower costs and fees 3 Enhance user experience 4 Enable future reform 43

44 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

45 Conclusion To capitalize on MPF for enhancing employee benefits to help in the quest for talents 45

46 End