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Seminar on From OAA to Old Age Income Protection

2. Overview. Demographics of the World, China and Hong Kong ??,??????????World Bank 5-Pillar Pension Model ?????????????World Bank Criteria for Assessing a Pension System ??????????????Evaluating Hong Kong's Pension System ?????????Evaluating China's Pension System ?????????

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Seminar on From OAA to Old Age Income Protection

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    2. 2 Overview Demographics of the World, China and Hong Kong ??,?????????? World Bank 5-Pillar Pension Model ????????????? World Bank Criteria for Assessing a Pension System ?????????????? Evaluating Hong Kongs Pension System ????????? Evaluating Chinas Pension System ????????? The Perfect Pension System ???????? Conclusions ??

    3. 3 Demographic Changes Pose Challenges ???????????

    4. 4 Demographic Changes Pose Challenges ???????????

    5. 5 The Original World Bank 3-Pillar Pension Model ???????3????????

    6. 6 The Extended 5-Pillar Pension Model ?????????????

    7. 7 WB Criteria for An Effective Pension System ??????????????????

    8. 8 Two Aspects of Pension System ?????????

    9. 9 The 5-Pillar System in Hong Kong Context ???????????

    10. 10 The 5-Pillar System in Hong Kong Context (Contd) ???????????(?) NOAA and HOAA, at HK$625 and HK$705 per month, are grossly insufficient ?????????????,?????625???705??,????? ORSO and MPF are the two types of funded pension system in Hong Kong ??????????????????????????? Under current rules, assuming 5% net of fees return, 5% salary increases, and a 35 year work life, MPF can provide less than 30% replacement income for retirees ??????,???5%?????????5%?????,??35??,?????????????30%?????

    11. 11 General Comments on the MPF ?????????? MPF has been successful as a compulsory savings scheme for the employed population ???????????????????????? High compliance rate ???? Investment choice ???? No scandals ???? BUT ??

    12. 12 General Comments on the MPF (Contd) ??????????(?) Design of MPF needs improvement ???????????? Lump sum payment at retirement, not monthly income ????????,??????? Retirees will have to bear the longevity risk, inflation risk and risk of poor investments ????????????,???????????? Insufficient contributions will lead to insufficient replacement ratio at retirement ?????????????????? Investment scope too rigid excludes mainland China, alternatives, etc. Consider home bias ??????? ?????????,????????? No tax incentive for voluntary contributions ??????????? Insisting that capital preservation funds be offered makes no sense ???????????? Long term, investing in capital preservation funds => losing value ????????? => ??

    13. 13 How Does Hong Kong Measure Up? ???????

    14. 14 The 5-Pillar System in China Context ???????????

    15. 15 The 5-Pillar System in China Context (Contd) ???????????(?)

    16. 16 Pension Reforms in China - Contributions and Benefits ?????????? ?????

    17. 17 Pillar II - Enterprise Annuities ??II - ???? Voluntary supplementary plans set up by employers according to MoLSS Regulations 20 and 23 in 2004 ??2004?????20?23??,????????????? Tax concessions to encourage EAs not yet finalised ?????????????????? Conversion of non-EA supplementary plans to EA format, e.g.: after Shanghai Scandal ???????????????????? (?????????) EA licenses - 12 Trustees 12???? ?????? - 18 Administrators 18?????? - 21 Investment Managers 21?????? - 10 Custodians 10????

    18. 18 How Does China Measure Up? ???????

    19. 19 General Comments on Chinas Pension System ???????????? Has come a long way since Document 26 in 1997 ?1997?26????,???????? In general basic design is sound, however implementation remains an issue ????,???????,?????????? Empty accounts for Individual Accounts ???????? Expansion to rural population a necessity ??????????? Pension governance issues ??????? Improvements needed to further refine the system ???????????? Individual accounts: broaden investment scope and outsource to private sector? ????:??????????,????????? EA: clarify tax situation: ????:?????? EA: promulgate master trust rules to encourage SME participation ????:??????????,???????? Must gradually raise retirement age ??????????

    20. 20 Summary ??

    21. 21 Perfect Pension System ??????? Integrated long-term approach to ensure adequate retirement income ???????,????????? Recognises changing employment structure, family patterns and personal interest ???????????,????????? Maximizes coverage and participation ??????????? Leads to savings culture by individuals ???????? Increases national savings and economic growth ??????????? Has widespread support from community and policy makers ??????????????? Has effective regulatory structure ????????? Is simple to understand ????

    22. 22 Thank You! ??! Questions? ????

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