Learning & Development Asia 2024
Why ORSO’s survival is good news for employers and their employees

Why ORSO’s survival is good news for employers and their employees


By Francis Chung, executive chairman, MPF Ratings

The HK$1.16 trillion MPF system covering 4.6 million Hong Kong workers received its first contributions in December 2000, but as well intentioned as the system is, for employee retention focused employers it’s also created unintended consequences, one of which may have cost employers and their employees significantly. The good news is it’s not too late to rectify the situation.

Faced with a deadline to join a mandatory system that places compliance obligations squarely at the feet of employers, the urgency to legislatively comply largely superseded employee considerations. Additionally MPF providers, hungry for assets under management, had little motivation to provide employers wishing to make contributions above the mandatory level with alternative arrangements.

But two decades after MPF’s establishment, employers making additional top-ups – of which there appears to be a surprisingly high number – are slowly realising what MPF may cover in its breadth, may lack in depth and flexibility to be a suitable employee benefit and retention platform.

A total of 44% of respondents to the Employers’ Federation of Hong Kong’s 3rd annual Employers’ MPF Expectations Survey stated they currently make contribution top-ups through MPF’s voluntary contribution (VC) accounts, but if you’re a believer in the often espoused MPF narrative of high fees, poor performance, and limited fund choices, why would one voluntarily contribute into such a system?

Perhaps the narrative is wrong, perhaps employers are unaware of alternatives, or perhaps a combination of both. The arc of this article is not to discuss the explicit merits or otherwise of MPF, rather to identify alternatives for employers, and there is an alternative, one which offers flexibility – flexible fund choices, vesting scales and drawdown options, and one which potentially affords employers and members significant tax benefits pre and post retirement.

Established in the early 1990s to regulate non-compulsory corporate pension schemes, the Occupational Retirement Scheme Ordinance (ORSO) legislation allows for flexibility in establishing and administering group retirement plans.

But when MPF was established many employers chose to either wind their ORSO schemes up or closed them to new members, and in lieu of the benefit gap, made top ups through MPF, but one need not have done so and in a financial wellness focused workplace complementing mandatory MPF contributions with additional contributions through an ORSO plan may better suit both employers and employees alike.

For employers with existing ORSO plans perhaps now is an ideal time to revisit participation and suitability while for those looking to establish an ORSO plan, the merits should be discussed with a specialist ORSO consultant such as Indigo, Mercer or Willis Towers Watson. A combined MPF and ORSO strategy offers employers broader scope for benefits planning and their employees the ability to create a potentially more tailored retirement solution.

The expectation was the advent of MPF would signal the demise of ORSO plans, but ironically, in no small part, awareness arising from growing MPF account balances has led to a refocus on the merits of the ORSO.

Rather than signal the end, for employers interested in the welfare of their employees, the ORSO complements MPF splendidly.



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