PLC Bills Committee on
Provident Fund Schemes Legislation (Amendment) Bill 1997
Meeting on 16 December 1997
Information Note on ORSO Scheme Operators
This paper provides the information about ORSO scheme operators which the Committee Members requested at the meeting on 16 December 1997.
2.Members requested the following information about ORSO scheme operators :
Information on ORSO Scheme Operators
- the existing market share of different types of ORSO scheme operators (i.e. whether they are local or overseas companies); and
- the number of ORSO scheme operators (or providers of pooled investment funds) at the enactment of the Occupational Retirement Schemes Ordinance several years ago and the current number of scheme operators.
3.Regarding paragraph 2(a) above, according to statistics provided by the Registrar of Occupational Retirement Schemes, the existing market share (based on the number of members) in respect of local and offshore ORSO scheme operators is as follows :
|Type||No. of members
|Local companies, including individual trustees||159, 271 (18.5%)
|Offshore companies||577,481 (67.0%)
|Individual trustees||124,824 (14.5%)
|Total ||861,576 (100%)
4.The statistical information shows that a majority of the ORSO scheme operators are offshore incorporated. This is attributed to a number of factors :
- Most multinational employers in Hong Kong tend to set up their retirement schemes and engage offshore scheme operators that are preferred by their parent companies.
- Secondly, with the uncertainty of 1997 some time ago, many employers and employees preferred the use of offshore scheme operators as a way to protect scheme assets from political risk. In fact, most of the major service providers have both local and offshore subsidiaries for employers to choose from.
- Most life insurance companies who operate ORSO schemes in Hong Kong are branches of oversea companies.
5.It is envisaged that the MPF market will show a different picture :
- Unlike employers with ORSO schemes, most employers enrolling in MPF schemes will be the small and medium employers who do not have offshore connections or obligations.
- The 1997 uncertainty is now cleared.
- The proposed stringent requirements under the MPF System to protect the security of scheme assets, particularly the proposed requirements on MPF approved offshore trustees (such as all directors must be individuals, there must be a Hong Kong Chief Executive Officer normally residing in Hong Kong, must be under effective supervision by home regulator, subject to Hong Kong law, etc.) will make it very impractical to use an offshore company to carry out MPF business :
- As most of the existing offshore scheme operators are incorporated in offshore havens (e.g. Bermuda) which will fail to meet the effective home regulator test, we envisage that most of the service providers will use local subsidiaries to carry out MPF business and to ring-fence their liabilities.
- In fact, the major scheme operators have already indicated that they will either use their existing local trust companies or form new local trust companies to carry out MPF business.
6.Regarding paragraph 2(b) above, there are currently 87 companies recorded under ORSO as administrators of ORSO schemes. Out of this, 34 are administrators of pooled retirement funds as listed in the Annex.
7.The data at the enactment of the Occupational Retirement Schemes Ordinance several years ago are not available because past record of such data is not separately kept under the computer system of the Registrar's Office. However, recent record shows that there are 4 new pooled retirement fund administrators reported under ORSO in 1997.
Mandatory Provident Fund Office
Financial Services Bureau
8 January 1998