Following is the speech by the Acting Secretary for Financial Services, Ms Au King-chi, in moving the second reading of the Mandatory Provident Fund Schemes (Amendment) Bill 2001 in the Legislative Council today (May 23):
I move that the Mandatory Provident Fund Schemes (Amendment) Bill 2001 be read the second time.
The objective of the Bill is to make technical amendments and improvements to the provisions in the Mandatory Provident Fund Schemes Ordinance (the Ordinance) and the Mandatory Provident Fund Schemes (General) Regulation (the Regulation), to better protect the scheme members and facilitate the effective operation of the Mandatory Provident Fund (MPF) System.
Firstly, I will explain about the proposals to enhance the protection of scheme members. At present, the prior approval of the Mandatory Provident Fund Schemes Authority (MPFA) is required before changes can be made to the governing rules of a scheme. This is to ensure that such amendments would not contravene the requirements of the Ordinance. However, the present definition of governing rules in the Ordinance is not wide enough to cover the offering document and participation agreement, which respectively set out details of the registered scheme and the terms and conditions agreed between a participating employer and the scheme trustee. The content of such documents should also comply with the requirements of the Ordinance. The Bill therefore proposes to include such relevant documents in the definition of governing rules and any changes to such documents by the scheme trustees will require the prior approval of MPFA.
Improvements are also required for the provisions in respect of default contributions. At present, if employers have default contributions, a surcharge of 20% per annum may be imposed on them. However, the Regulation only provides for levying the surcharge on arrears up to the end of the second payment period. If an employer continues to delay his contributions after the second payment period, the amount of surcharge will not be further increased. To deter any further delay by the defaulting employer in making good the default contributions, we propose to empower MPFA to issue further notices to the defaulting employer, levying surcharge on any outstanding arrears after the second payment period.
At present, MPFA is empowered to impose conditions with respect to registered schemes, trustees and pooled investment funds upon granting the relevant approval. However, it is unclear whether MPFA can impose additional conditions or amend existing ones after the relevant approval has been granted. The conditions imposed by MPFA usually reflect the prevailing best practices in the industry, and such conditions should be updated in accordance with such practices. To put it beyond doubt, the Bill clarifies that MPFA would have the power to modify and update the conditions imposed upon registered schemes, approved trustees and approved pooled investment funds.
The Bill also seeks to remove certain anomalies in the existing provisions. For instance, to amend the definition of contribution day in respect of casual employees to allow their employers to make contributions on the next working day following the payment of income. Such arrangement aims at facilitating the employers who pay their staff very late at night. Besides, the Bill also contains provisions to put it beyond doubt that self-employed persons who are less than 18 or who have reached the retirement age of 65 are not required to join MPF schemes, and an employer can enrol his employees who are under 18 or above 65 in MPF schemes and make voluntary contributions.
Madam President, at present, the Ordinance sets out the functions of MPFA. We now propose to add two functions in the relevant provisions, to better reflect the work of MPFA. The two functions include considering and proposing law reforms relating to occupational retirement schemes or provident fund schemes, and promoting and encouraging the development of the retirement scheme industry in Hong Kong.
Since the implementation of the MPF legislation, we have received comments on the relevant legislative provisions from various parties. We intend to review the operational aspects of the MPF legislation towards the end of the year, a year after the full implementation of the MPF System.
The Mandatory Provident Fund Schemes (Amendment) Bill 2001 improves the provisions of the MPF legislation, helps to enhance the protection of members' interests and the effective operation of the MPF System. I hope Members will support the amendment Bill.
Thank you Madam President.
End/Wednesday, May 23, 2001