Social Security Fund (FSS) previously (11 February) paid a visit to the Hong Kong Mandatory Provident Fund Schemes Authority (MPFA) to learn from Hong Kong’s experience in carrying out the Mandatory Provident Fund System (MPF System). Such information serves as a reference for implementing the Central Provident Fund System in Macao in the future.

Ip Peng Kin, President of the FSS Administrative Committee, Chan Pou Wan, Vice-President, Sam Kam San and Lei Chan U, members of the Administrative Committee, Ieong Iun Lai, Head of the Department of Social Security, Chan Pou I, Head of the Division of Contributions, travelled to Hong Kong on the morning of 11 February to visit MPFA, where a meeting was held with Diana Chan Tong Chee-ching, the Managing Director of MPFA, and Hendena Yu, Chief Operating Officer (Enforcement).

At the meeting, Ip Peng Kin introduced the double-tier Social Security System in Macao. The first tier has been implemented since 1 January this year; and in order to provide better living protection for the residents after retirement and to build up a non-mandatory Central Provident Fund System in the future that comprises of the contributions from the employers and employees, the Macao SAR government has launched the legislative process of the Central Provident Fund System. With regards to the Central Provident Fund System, the FSS has set up a research group to study and analyze the retirement protection systems practised in Taiwan, Hong Kong and Singapore. Hong Kong has been implementing the MPF System for a decade and has some experience in the establishment and implementation of the System. This exchange activity helped to provide more reference to implement the Central Provident Fund in Macao.

MPFA representatives introduced the situation and the characteristics of implementing the MPF System in Hong Kong. Implemented on 1 December 2000, the MPF System is one of the three pillars that the World Bank advocated in 1994. It is a privately-managed mandatory contribution scheme. The MPF System is targeted at the working people who reach 18 years of age to under 65 years of age. The employer and employee each contributes 5% of the employee’s relevant income. There are statutory ceiling and floor for the relevant income, which are respectively HK$20,000 and HK$5,000 monthly. An employee with relevant income less than HK$5,000 monthly is not required to make any contribution, but the employer still needs to contribute 5% of the employee’s relevant income. If an employee’s relevant income is between HK$5,000 to HK$20,000 monthly, both the employer and the employee need to contribute 5% of the employee’s relevant income. If an employee’s relevant income is more than HK$20,000 monthly, the contributions to be made by both parties are capped at $1,000 monthly. The contributions of the self-employed persons is 5% of their relevant income, which is still subject to the maximum and minimum level of the relevant income.

At present, there are a total of 19 approved trustees providing 41 MPF Schemes and 421 constituent funds for the Scheme members to choose from. Under the MPF Scheme, there are different types of constitutent funds, such as mixed asset funds, which equal to 43% of the total assets, and followed by equity funds, which makes up 33% of the total assets. From its implementation to 31 December 2010, the overall investment of the MPF System has an annualized internal rate of return of 5.5%, net of the administration fees.

MPFA said that they have all along endeavoured to perfect the MPF System and made several legislative amendments in the past decade in order to strengthen the protection of the Scheme members. In the future, MPFA will continue to review and improve the MPF System, including regular review of the maximum and minimum level of the relevant income of MPF contribution, simplying the operations and promoting competition in the market in order to leave room for downward adjustment of MPF charges, implementing the “Employee Choice Arrangement”, strengthening law enforcement to crack down on illegal employers, as well as implementing the MPF investment education.

Then, both parties continued to share experiences on the implementation and operations of the MPF system. They exchanged opinions about the establishment of the Central Provident Fund in Macao. Both sides also agreed on having more contacts in the future and conducting exchange visits to improve the social security and retirement systems of the two regions.