TABLE OF CONTENTS Introduction... v Contributors... ix About This Report... 1 Regional Comparisons... 3 Profile of Social Security and Mandatory Company Benefits... 4 Cost Analysis of Social Security and Mandatory Company Plans... 22 Profile of Voluntary Company Benefits... 29 Cost of Living Indices... 36 Key Data... 37 Country Chapters... 39 Australia... 39 Bangladesh... 72 China... 89 Hong Kong... 124 Macau Special Supplement... 147 India... 151 Indonesia... 179 Japan... 196 Korea... 224 Malaysia... 244 New Zealand... 267 Philippines... 288 Singapore... 315 Sri Lanka... 339 Taiwan... 355 Thailand... 381 Vietnam... 402 Exchange Rates... 421 About Towers Watson Data Services... 422 2012 Retirement and Risk Benefits Report - Asia Pacific vii
LAYOUT OF EACH COUNTRY ANALYSIS Each of the country sections follows a common pattern to facilitate ease of reference: Distinctive Features of the Benefits Environment Key Data Key Changes in Recent Years 1 Statutory Benefits Overview Retirement Benefits Survivors Benefits Disability Benefits Workers' Compensation Benefits Healthcare Benefits Cash Sickness Benefits Maternity and Parental Benefits Family Allowances Unemployment Allowances Social Security Contributions 3 Voluntary Company Benefits Practice Overview Retirement Benefits Survivors' and Disability Benefits Healthcare Benefits Other Voluntary Company Benefits 4 Accounting and Reporting 5 Tax Aspects of Benefit Programs 6 Useful Addresses 2 Mandatory Company Plans Overview Retirement Termination Indemnities Other Mandatory Company Benefits 2012 Retirement and Risk Benefits Report - Asia Pacific viii
ABOUT THIS REPORT Countries included in the 2012 Retirement and Risk Benefits Report - Asia Pacific are: Australia, Bangladesh, China, Hong Kong (with a special supplement on Macau), India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam. The Regional Comparisons section is a tabular and graphical presentation of benefits provision and key statistics in the 16 countries/locations. This section provides cross-country comparisons of the following: Provision of social security programs and mandatory company plans Profile of retirement plans Workers compensation Death and disability benefits Provision of healthcare benefits Contribution of social security and mandatory company plans Provision of voluntary company retirement plans Key data: GDP, inflation Regional cost-of-living indices Country chapters are organized into the following sections, subject to the individual characteristics of each country: Overview of Benefits This section highlights the distinctive features of the benefits environment and key economic data, and summarizes new developments. Social Security and Mandatory Company Plans A comprehensive review of social security, such as retirement, survivor, disability, workers compensation, healthcare, family allowance, and unemployment benefits. Also included here are company-paid items mandated by law, such as severance pay. Voluntary Company Benefit Practice A detailed description of benefit practice among private employers with regard to retirement plan design, survivor and disability benefits, and healthcare benefits. Perquisites are also provided base on our annual compensation survey. Accounting and Reporting This section highlights the accounting and reporting requirements set by the local authority. Tax Aspects of Benefits Program A quick reference guide to the taxation of benefits. Useful Addresses List of addresses and websites of relevant contacts. 2012 Retirement and Risk Benefits Report - Asia Pacific 1
Hong Kong DISTINCTIVE FEATURES OF THE BENEFITS ENVIRONMENT Social security coverage in Hong Kong is minimal, except that hospital cover is universal. Hence, the emphasis is on private provision of most forms of benefit, including privatized mandatory retirement schemes. In recent years, the pension and benefits community has been lobbying for a more comprehensive regulatory framework to protect scheme members interests. There is also increasing awareness of the potential financial problems of supporting an aging population. The government has taken steps recently to establish, via the Mortgage Corporation, a mechanism to encourage banks to offer reverse mortgages to those who are age 60 or above. This will enable elderly home owners to derive an income from their properties whilst continuing to live in them. On December 1, 2000, the Hong Kong government introduced the Mandatory Provident Fund Schemes Ordinance. This legislation requires both employers and employees to contribute a minimum of 5% of relevant income into a privately managed trust. Under normal circumstances, employees are allowed to withdraw their account balance at age 65, though consideration is being given to enabling those in serious ill health to withdraw funds earlier. In addition, the Occupational Retirement Schemes Ordinance (ORSO) provides a tax incentive for employers to run voluntary company retirement schemes. Since the Mandatory Provident Fund (MPF) scheme was introduced, employers with MPF-exempted retirement schemes can offer these as an alternative to an MPF. According to the Mandatory Provident Fund Schemes Authority, approximately 70% of the working population in Hong Kong are MPF members, while 15% participate in ORSO schemes or other forms of statutory pension or provident funds such as those for civil servants. Total assets invested in the MPF and ORSO schemes amount to approximately HKD350 billion and HKD250 billion, respectively. KEY DATA 2011 2012 2013 Consumer prices (% change p.a.) (1) 5.2 3.4 2.9 Unemployment rate (% p.a.) (1) 3.3 3.4 3.2 Labor population (millions) (1) 3.70 3.73 3.75 GDP growth (% real change p.a.) (1) 4.8 3.8 4.8 Top marginal tax rate on personal income (%) (2) 15.00 15.00 15.00 Top personal income tax threshold (3) HKD1,518,000 HKD1,518,000 HKD1,518,000 (1) Source: Economist Intelligence Unit - December 2011. Data for 2011 are actual; data for 2012 and 2013 are forecasts. (2) Government source. (3) For single taxpayers; for married taxpayers the applicable threshold is HKD2,436,000. 2012 Retirement and Risk Benefits Report - Asia Pacific 125
Hong Kong 2. MANDATORY COMPANY PLANS 2.1 OVERVIEW The Mandatory Provident Fund Schemes Ordinance (MPFSO) prescribes the minimum level of retirement benefit funded by employees and employers. The MPFSO was introduced in 1995 and became effective in 2000. The main features of the Mandatory Provident Fund (MPF) include: All employees are subject to the MPF regime, with a few exceptions. Both employees and employers contribute to the MPF. Benefits derived from MPF mandatory contributions are immediately and fully vested and must be preserved within the MPF retirement scheme system until retirement, death, disablement, or permanent departure from Hong Kong. Benefits derived from MPF mandatory contributions are portable from one MPF scheme to another upon change or cessation of employment. MPF contributions are protected through stringent investment guidelines and trust controls, as well as by the provision of a compensation fund. MPF schemes are administered by the private sector. Employees enrolled in voluntary retirement plans that comply with the Occupational Retirement Schemes Ordinance may be exempt from participation in the MPF scheme if certain conditions are satisfied. 2.2 RETIREMENT, SURVIVORS' AND DISABILITY BENEFITS System Type of Plan Plan Name Legal Framework/ Recent Changes Mandatory company plan. Defined contribution plan. Mandatory Provident Fund (MPF). Mandatory Provident Fund Schemes Ordinance (MPFSO). The MPF is regulated by the government but operated by private entities. In the past, the choice of MPF provider fell solely to the employer. To give members better control over investment decisions about their contributions, the MPFSO was amended in July 2009 to enable members to choose their own MPF scheme in respect of their own mandatory contribution balances (not contributions by employers) held under their current employment. The implementation of the amendment is now deferred, provisionally to 2012 (originally expected by the end of 2010), to ensure that a proper monitoring framework, possibly with ancillary regulations to oversee the selling process, is in place at launch. Plan Administered by Private providers designated as approved MPF trustees. Providers are required to take out insurance to indemnify plan members against losses from malfeasance or misconduct by trustees and service providers. Supervisory Bodies Scheme Status The Mandatory Provident Fund Schemes Authority, the Insurance Commissioner, and the Securities and Futures Commission. Open. Eligibility Requirements Participation in Plan All employees (and the self-employed) aged 18 to 65 are required to participate in the MPF after 60 days of service with their employer. However, a few categories of employees are excluded from mandatory participation, including: Foreign employees coming to Hong Kong under a short-term employment contract (up to 12 months) with a working visa or participating in a home country retirement scheme; 2012 Retirement and Risk Benefits Report - Asia Pacific 132
Indonesia 1. SOCIAL SECURITY 1.1 OVERVIEW The benefits provided by the original Indonesian social security scheme, ASTEK, were very modest and only about 7% of the workforce was covered. Although participation rates for the JAMSOSTEK system, established in 1992, are higher than for ASTEK (according to the government, as of 2008 there were approximately 24 million workers registered with the scheme, out of a labor population of 110 million), it is estimated that only 7.9 million of those were actively paying contributions. Civil servants and the armed forces are covered by separate systems. JAMSOSTEK is administered by an agency called PT Jaminan Sosial Tenaga Kerja. The system provides only work-related social security benefits under four categories: Retirement (JHT, or Jaminan Hari Tua); Death benefits (JKM, or Jaminan Kematian); Occupational accident, injury and death (JKK, or Jaminan Kecelakaan Kerja); and Healthcare (JPK, or Jaminan Pemeliharaan Kesehatan). The system is applicable to all private enterprises with 10 or more employees or with a monthly payroll of IDR1 million or more. As the monthly minimum wage in most jurisdictions is equal to or exceeds 75% of IDR1 million, the system effectively applies to all companies with more than one employee. 1.2 RETIREMENT BENEFITS System Type of Plan Legal Plan Name Legal Framework/ Recent Changes Social security. Mandatory provident fund. JHT (Jaminan Hari Tua). Social Security Law/None. Plan Administered by Social security agency (PT Jaminan Sosial Tenaga Kerja). Scheme Status Open. Eligibility Requirements Participation in Plan Benefit Entitlement All employees in the private sector working for enterprises with 10 or more employees or a monthly payroll of IDR1 million or more. Retirement benefits are payable from age 55. There is no requirement to meet a minimum period of contributions, nor is it necessary to retire to receive benefits. Benefits are also payable in the event of permanent total disability, permanent emigration from Indonesia, the employee joining the armed forces or the civil service, or the member resigning from employment and not returning to work within six months, provided he or she had contributed for at least five years. Retirement Ages Normal Retirement Age Age 55. Early Retirement Age There is no early retirement option. Late Retirement Age Pensions can be deferred at the member's discretion without limit. 2012 Retirement and Risk Benefits Report - Asia Pacific 181
SOCIAL SECURITY Malaysia Benefit Entitlement Waiting Period For the full pension rate (50-65% from average monthly wage), the member must have paid at least 24 months of contributions in the 40 months prior to disability or paid contributions for at least two thirds of the months between the first date of coverage and the date of invalidity subject to a minimum of 24 months of contributions paid (full qualifying condition). Otherwise, the employee would receive a reduced pension rate at 50% provided contributions were made for at least one third of the months from first coverage to invalidity notice (reduced qualifying condition). An invalidity pension is payable to a member who is deemed incapable of earning one third of the salary of a similarly qualified person because of physical or mental incapacity. Chronic ailments or diseases that could be considered for invalidity are heart attack, renal or kidney failure, cancer, mental illness, chronic asthma, and other similar conditions. To receive the benefit the disabled member must be certified as an invalid by a medical board, including the Special Medical Board or the Appellate Medical Board. Proof must be given that the invalidity occurred before age 55 and the member ceased employment at that time. None. Compensation Definitions Covered Earnings Monthly wages. Refer to 1.3 Survivors Benefits for details. Benefit Formula Benefit The pension for full disability is equal to 50% of the deceased's average monthly wages (AMW) for the first 24 months of coverage plus 1% of AMW per additional 12-month period of contributions. The maximum benefit is 65% of AMW and the minimum is MYR250 per month. The AMW is equal to the monthly average of wages paid in the 24 months prior to invalidity. If the disabled person cannot meet the conditions for full invalidity benefits, he or she is eligible for a reduced benefit if contributions have been made for one third of the total months from the date of first coverage, provided that a minimum of 24 months of contributions have been paid. The reduced invalidity pension rate is 50% of AMW, subject to a minimum of MYR250 per month. The following benefits are also provided to the disabled: Constant Attendance Allowance: The invalidity pension is increased by 40% if the disabled person requires constant attendance, subject to a maximum monthly amount of MYR500. Invalidity Grant: If the disabled person does not meet the qualifications for an invalidity pension but has made at least 12 monthly contributions, he or she is entitled to an invalidity grant equal to the contributions paid plus interest. Rehabilitation Benefit: Facilities for physical and vocational rehabilitation are provided free by SOCSO to an employee qualifying for an invalidity pension. Payment Form of Payment Maximum Length of Payment Increase of Pensions in Payment Monthly payment. For life. Benefits are adjusted on an ad hoc basis, depending on the cost of living, economic condition and the SOCSO funds. Contribution Integrated into Survivor Benefits. 2012 Retirement and Risk Benefits Report - Asia Pacific 252