The common retirement MPFA black hole is difficult to fill

November 11, Sunday. Retirement "buddy", the "boss" of things. Hong Kong Mandatory Provident Fund was launched in December 2000. In Hong Kong, the collapse of small businesses and owed to the employees pension even heard, provident fund or MPF employer as long as the time to the account into the fixed sum of money, the responsibility of the employee on retirement protection, the moment of leaving the beneficiary of the scheme ( not necessarily the retirement age) has been completed, the private sector pension payment issue, Hong Kong's economy will not become a burden.

However, the United States, Britain, the situation is very different. Judging from the recent trend, the private sector retirement plans are insolvent worsening, not without effect on corporate investment sentiment; Anglo-American low beyond low interest rate environment, and make it more difficult for commercial organizations out of the "MPF black hole".

Retirement plans alternation

The dilemma faced by the Anglo-American retirement protection scheme, on the Mainland and Hong Kong Although there is no direct impact on awash in cash, but the giant enterprises in the West refused to invest in central bank policy to do anything to the extreme, still unable to stimulate business expansion recruit. Why is this so? The uncertain economic outlook, the "MPF black hole" is a big reason.

Common retirement protection scheme is mainly divided into two categories, one for fixed pension benefit plans (defined benefit plans, DB); another pension contribution plans (defined contribution plans, the DC). Such as the Hong Kong launch of the MPF, most of the original employer DB plans, after the advent of the DC retirement plans, divergent after replaced. Anglo-American enterprise, still fixed income plan to provide new employees have been rare.

DB and DC What's the difference? In short, DB is a bit like the civil service pension system, employers calculated in accordance with the specific equation the employees deserved retirement income, and timing fixed payment plan until the beneficiary death. DB schema, market risk, and assets under management responsibility borne by the employer Yili. Market fluctuations or insufficient to meet the employers' commitment to pay a fixed amount of revenue generated by the investment project, corporate responsibility for the completion of the retired employees, must make up the difference, employer liabilities in retirement budget increase in the amount of column. The situation does not improve, the pension insolvent hardly surprising.

Today in Britain and the United States has almost completely replace DB DC pension plans. Employers, employees defined contribution arrangements, bilateral relations at the end of the labor contract Huashangjuhao capital injection to the pension accounts. Under the defined contribution plan, the employees after retirement can enjoy ideal protection, depending on the DC plan investment performance in the engagement period, while the selection and management of assets, the responsibility falls on the employee who has nothing to do with employers Yigai. The most referenced U.S. pension contribution plan, the private sector 401 (k), the public sector and not-for-profit organization, compared with 403 (b).

Anglo-American enterprise collective DC replace DB pension problem seems to be solved completely, but this is not the case. Employers stop fixed income retirement plan to new employees, but the original beneficiary of the DB plans still can not shirk its responsibility. Annual "Purple Book" published last Wednesday by the British retirement funds (Pension Protection Fund, PPF) to see the the old Bi startled.

Insolvent

The PPF figures cited in the report, as of the end of March this year, the All England still fixed income plans up to 6316 qualified pension coverage up to 1170 people. As of March 31, 1.0268 one trillion pounds over six thousand total assets of the plan, but the debt had reached £ 1.231 trillion. In other words, the British qualified DB plans recorded a deficit of 204.2 billion pounds. The same period last year, the deficit amount to 1.2 billion pounds, just one year by more than 200 billion pounds deficit actually mad!

British fixed-income retirement plans such as the potential bottomless pit, the main reason is that the amount of Bank of England to implement wide policy, to purchase debt pressure interest rates, the British bond yields kept falling. DB plans, employers bear the responsibility for payment of the fixed-income retired employees. For example, employers promise to pay a fixed income of 5000 pounds in the year after the retirement of the plan beneficiaries, assuming interest rate of 5% per annum, pension accounts only for 10 million pounds will be enough.

However, if the interest rate halved to 2.5%, the amount in the account will have doubled to 20 million pounds in order to fulfill the responsibility to pay 5000 pounds per year of fixed income.

UK DB pension plan liabilities part, generally in accordance with a AA credit rating the level of corporate bond yields. In the past four years, the United Kingdom Level AA corporate bond yields halved from 7.7% to 3.7%, during the corresponding doubling of the amount of the liability of the fixed-income retirement plan. Yes, rising bond prices will rise in the value of assets in the DB account. However, in recent years, the situation, the pension assets of value-added speed backward in debt to the speed, so that the "retired black hole by £ 200 billion in just one year, between mad.

Rising interest rates will definitely help soothing pension insolvent, but the rate hike impact on stock and bond will make pension asset values ​​fell, liabilities down the pace if able to catch up with asset impairment, improving pension insolvent phenomenon does not help.

Anglo-American enterprise in the central bank repeated shots to stimulate investment, and would rather not awash in cash to expand its business to become a miser. MPF black hole "difficult to fill, is a neglected and important reasons!