HONG KONG- Hopes that the now-stalled Mandatory Provident Fund in Hong Kong might get off the ground next year are encouraging some service providers to plan offerings for this marketplace.
But exactly when the MPF arrangement will finally debut in Hong Kong is still unclear.
Although the primary legislation creating a mandatory retirement plan for Hong Kong's retirees was passed last year, legislation covering its rules and regulations has been snagged amid Hong Kong's reunification with China. At this point, close observers see passage of MPF regulations coming by the beginning of 1998 at the earliest.
If the current provisional legislature passes the regulations in the early part of 1998, fund managers and other service providers might be able to launch their MPF offerings as early as August 1998. But there is reason to think it could take a good deal longer.
Anthony N.C. Griffiths, a consultant who has assisted the government's deliberations on this matter, said it was possible the provisional legislature might produce draft regulations this year.
Assuming passage requires two to three months, it could be that the Mandatory Provident Fund Authority, which will oversee the MPF system will be set up in February or March 1998. This will be followed by a number of steps in the public and private sectors.
The fund managers, insurance companies, administrators and trustees who will bring the plans to the public are being called service providers. "Service providers will register their products and this will allow marketing to go ahead by August 1998," said Mr. Griffiths, managing director of GML Consulting Ltd. However, he admits such a schedule is very uncertain.
Rob Pocknee, general manager, MPF Department, National Mutual Insurance Co. Ltd., would "like to be" getting product on the market "tomorrow." Nicholas Crouch, vice president of provident funds, Manulife International Ltd., is just as eager, but refers a starting date of August 1998 as "a bit ambitious."
Carolyn Butler, managing director, AIA Pension & Trustee Co. Ltd., pointed out that many separate, complicated processes have to go off smoothly before service providers can market MPF products.
"We may see (the provisional legislature) pass legislation early next year, but if they don't have time to pass it, then we are not likely to see legislation (even) by late 1998" because Hong Kong's first elections as a Special Administrative Region of China are scheduled for May 1998. That new body will have to take up the question all over again."
However, some money managers aren't stalling plans for MPF offerings until all legislation has passed. For instance, HSBC Provident Fund Services has set Jan. 1, 1999 as the day it will start marketing retirement plans, which will conform to the requirements of Hong Kong's MPF ordinance. HSBC will start accepting contributions Jan. 1, 2000.
Chief Executive Gregory Willis believes these are "realistic dates" in view both of the anticipated passage of regulations by the provisional legislature and the amount of time it could take to create the Mandatory Provident Fund Authority regulatory body.
Two insurance companies I New York Life Insurance Worldwide Ltd. and Principal Insurance Company (Hong Kong) Ltd. I are trying to establish themselves as service providers for MPF plans. And they are acting in advance of the complicated legislative and bureaucratic process that must evolve before service providers can legally enter the arena.
The two insurers recently have joined hands to market Harvest Employee Benefit Scheme, aimed at small- to medium-sized employers. The companies are offering retirement schemes that will be converted the plans to comply with MPF regulations once they are in force at no extra cost to the client. Principal claims to be the largest administrator of 401(k) employee savings plans in the United States.
Broadly, Hong Kong's MPF is aimed at addressing the needs of more than 80% of Hong Kong employers with fewer than 10 employees. Such employers typically offer neither retirement savings plan nor have fund managers or most insurers targeted these companies for coverage.
Primary legislation to create the mandated retirement system passed in Hong Kong's now-dismantled Legislative Council. But needed subsidiary legislation failed to pass before that body was abolished as part of Hong Kong's handover to China.
Hong Kong's reunification with China created a provisional legislature which has not yet screened the draft regulations. The MPF regulations were not the only victim of the change of government. But since they were mentioned in the maiden speech of the SAR Chief Executive Tung Chee-hwa, the industry believes Hong Kong's provisional legislature will give them a high priority.
