Hong Kong: Working and Living
Health, Education and Pensions
There is a public health-care system in Hong Kong, available to all residents, based on a network of polyclinics (primary care clinics) and hospitals, run by the Department of Health. Hospitals are managed by the Hospital Authority, a statutory body established only in 1990 and which is said to have done a good job of improving standards in the SAR's 38 public hospitals. Most doctors in Hong Kong are US- or European-trained. Some aspects of 'public' health-care are fee-based, including pharmaceuticals and various types of specialist treatment.
There is of course a parallel private health-care system, which will be preferred by many expatriates, especially if they have good health insurance policies, which are available locally. But costs are much higher than those obtaining in the public system, needless to say, and private treatment may often not be a cost-effective route. In most cases, the standard of care is said to be same in the two systems.
The education system in Hong Kong bears many similarities to that of the United Kingdom, on which naturally enough it was largely modelled.
The government has attached a high priority to education, and more than 20% of its budget is devoted to the system of schools and universities.
In the state system, there are comprehensive primary schools, usually teaching in Cantonese. Class sizes tend to be high. Subsequently, children are streamed according to ability into three tiers of secondary school, based on examination results. The first three years of secondary school are compulsory; the final two years are optional, and are devoted to preparation for university. The government is about to add a further year of secondary schooling, and will also extend the existing 3-year university course to four years.
The school year begins in September. It is normal for children to attend three years of nursery school, sometimes beginning as young as two years; these schools have mixed state and private funding.
For language reasons, most expatriates use the private or semi-private (State subsidized) schools system. Some private schools teach the International Baccalaureate.
University education is of a high standard, but is not free. Annual tuition costs are likely to run out at US$10,000, although there are subsidies available for poorer students. Despite the public schools' focus on Cantonese, the universities require proficiency in English, and much teaching is in that language. School buses are systematically available, but are paid-for. Almost all schools require uniforms, and there is a heavy emphasis on correct, disciplined behaviour (in this respect, at least, Hong Kong departs from the British model!).
Hong Kong introduced the Mandatory Provident Scheme in 2001, under which employers, employees and the self-employed are obliged to contribute to pension provision for themselves with one of a number of authorized pension funds.
There were 572 authorized insurance brokers as at June 30, 2010. All of them are members of the two approved bodies of insurance brokers, namely The Hong Kong Confederation of Insurance Brokers and Professional Insurance Brokers Association. In addition, there were 7,423 persons registered as chief executives/technical representatives of these authorized brokers as at June 30, 2010.
Insurers are active players in the retirement scheme business. In 2001, premiums received by the life (long-term) insurance sector in Hong Kong were HKD57m. This figure has been growing rapidly, not least due to the introduction of the Mandatory Provident Scheme.
Yearly contributions for Retirement Scheme contracts administered by insurers decreased 1.2% to HKD15.6 billion. By the end of 2009, there were 61,382 Retirement Scheme contracts carrying net liabilities of HKD151.6 billion.
The MPF funds delivered negative returns of 8.87% in 2001 and 7.19% in 2002, the first two years of the scheme's inception. In 2004, Hong Kong's retirement funds recorded a 9.27% average return. About 90% of the 295 mandatory provident funds (MPF) covered in a survey delivered positive returns in the period. Since the launch, 88% of MPF funds have managed to record positive returns, with an overall average performance of 10.48%. By June 30, 2010, there were 39 registered MPF schemes with an aggregate net asset value of HKD307.6bn.
The Legislative Council in July 2009 passed the MPF Schemes (Amendment) Bill 2009, which lays the framework for employee choice. Under the system, employees can, at least once per calendar year, transfer accrued benefits derived from their employee mandatory contributions made during their current employment to an MPF scheme of their own choice.
This change will give employees access to a broader spectrum of MPF service providers, schemes and investment funds for investment of mandatory contributions that they make during their employment. Upon implementation, the proposal will result in 60% of MPF benefits being portable between trustees.
The Mandatory Provident Fund Schemes Authority has stated that the proposed new arrangement will not add undue burden with regard to trustees' administrative duties, while the transfer of employee mandatory contributions will not require employers to change their administration systems.
Taking into account the lead-time that trustees require to make necessary adjustments and other preparations, the Authority hopes that the proposal will be implemented within a year after the legislative exercise is completed.
As a corollary of the proposal, the authority will rename "preserved accounts" as "personal accounts", which it hopes will instill in employees a greater sense of MPF account ownership.
Just under one third of the respondents to a survey commissioned by the HKIFA in July 2009 said they would consider switching to another MPF service provider once the employee choice regime is implemented. The key reasons cited for switching providers are the desire to look for better investment returns (56%) and more fund choices (28%). Almost half (45%) indicated that they were not considering a switch. This is underlined by a perception that the switching process may be rather complicated, the HKIFA said.