REDEFINING WORKPLACE SAVINGS IN HONG KONG

REDEFINING WORKPLACE SAVINGS IN HONG KONG

The workforce in Hong Kong is changing. We are living longer, working longer, and will enjoy more time in retirement. We now have four generations working together; each has different skills and needs. Employers need a long-term savings solution that engages with each generation, is cost effective, and provides the peace of mind of strong governance. With average contribution rates of around 7% of basic salary, employers are making a significant investment into workplace savings and are demanding better value for money. LONG-TERM SAVINGS IS AN IMPORTANT ISSUE 1 1 st Retirement savings is the most important benefit in employees minds EMPLOYEES NEED BETTER VALUE FOR THEIR MONEY 63% Schemes with money market or no default investment option 48% Schemes with fewer than 10 investment options MODERN WORKFORCES REQUIRE MORE CHOICE AND PERSONALIZATION 54% Companies will review their investment options in next three years ⅔ Companies wishing to implement personalized communications or interactive tools AND BETTER HELP TO MAKE THE RIGHT CHOICES. Companies believe their member communications need improvement ½ 58% Companies planning reviews of employee investment communications in the next three years 1 1 Mercer. Mercer Retirement Savings Survey Hong Kong, 2013.

INTRODUCING MERCER SMART SAVINGS Mercer Smart Savings is a new ORSO scheme management solution for Hong Kong. We work with your existing trustee to provide administration, design, investment, and communications solutions that are tailored to your workforce. Our tools and processes allow us to significantly reduce the time taken to execute contribution payments and investment switches. Our enhanced online user experience provides members the ability to plan effectively and make real-time changes. We embed our investment advice into our solution, making it easier for users to choose investments that are right for their needs, and we have also included some new ideas around scheme design and communications. Mercer Smart Savings is a smarter ORSO plan management solution that delivers better outcomes for all. design governance investments processes communications 2

SMARTER DESIGN WHEN TWO PLANS ARE BETTER THAN ONE Hong Kong s retirement framework contains two major components: the Mandatory Provident Fund (MPF) and the Occupational Retirement Schemes Ordinance (ORSO). The MPF system is designed to provide all Hong Kong residents with a basic level of savings, with ORSO widely used for voluntary savings. If employees participate in an MPF, they must make at least the mandatory minimum contributions. However, if they are investing material amounts in excess of the mandatory MPF contributions, Mercer Smart Savings can help. Our approach is to meet the mandatory MPF requirements and then direct voluntary contributions into a flexible ORSO scheme using the Mercer Smart Savings solution. Do you offer employees the choice of an ORSO or MPF? Do you offer employees MPF only? MPF-exempted ORSO Voluntary MPF Mandatory MPF MPF-exempted ORSO Voluntary ORSO Mandatory MPF } Efficient processes. Customized to your workforce. Enhanced employee experience. Designed and managed with Mercer support. BUILD A PLAN THAT ALL GENERATIONS WILL APPRECIATE If you speak to employees under the age of 50 about retirement you are likely to get a less than enthusiastic response. Mercer Smart Savings provides companies the opportunity to transform their ORSO scheme into a flexible workplace savings scheme. Employees are permitted to make voluntary contributions to the ORSO scheme and withdraw at defined points in their career for purposes other than retirement. The primary purpose of the ORSO scheme remains providing retirement benefits, but additional flexibility is introduced to make the scheme more relevant to younger generations. By providing access to an efficient investment platform with suitable choice and support, members will be encouraged to contribute more and will increase their engagement with the scheme. Such a flexible approach allows you to start speaking with your employees about all the other things they want to save for a new car, a house, their education, building a family, taking time out and to position your retirement scheme as meeting all those needs. 3

SMARTER INVESTMENTS Investing for retirement can be complex there is no one size fits all solution. Mercer Smart Savings is designed with all types of members in mind so you can offer appropriate, cost-efficient choices. Mercer believes that smarter investing can be achieved by segmenting members according to broad investment preferences and designing investment options that will appeal to each segment: Do it for me, Help me do it, or Leave me to it. Broad Member Segments Do it for me Help me do it Leave me to it Less engaged and/or has limited experience in managing investments. Is not likely to review investment mix regularly. May only make changes when there is a significant event. Understands investments well but not fully engaged in keeping on top of it. Is happy to utilize readymixed investment ideas, subject to agreeing with philosophy. Actively uses workplace platform to accumulate retirement wealth. Exercises intelligent risk-taking. Is likely to make changes to the investment mix frequently. Target date: Reduces investment risk over time to improve predictability of outcomes at withdrawal date Lifestyle: Range of ready-made model portfolios at competitive fees and low tracking error Self-select: Range of highly rated stand-alone investment options Members may adopt one or more of these approaches at any point in their career ACCESSING OUR INVESTMENT CAPABILITIES Mercer Smart Savings offers a simpler way to cater for your members needs, as we provide investment oversight through: Leveraging our independent view of investment options, via our global research on over 26,000 investment strategies. Applying our current views on broad asset allocation for retirement purposes. Utilizing the technology to manage and diversify investment risks over time. Mercer Smart Savings allows members to easily blend their investment approaches at any time, while Mercer proactively assists trustees and employers in their duties to manage the investment options to meet the needs of their members. 4

SMARTER COMMUNICATIONS Mercer Smart Savings is a highly customizable workplace savings solution. There is flexibility to incorporate your logo, branding, and corporate identity into the user interface. Members can access their information and make their decisions via a secure bilingual online portal. Dedicated call center and email support are available for employees who have questions or need assistance. EMPOWERED DECISION-MAKING The Mercer Smart Savings platform provides members 24/7 access to information and tools that use real-time data to help members understand their long-term savings needs and how to achieve them. Your Attitude to Risk tool allows members to learn and understand their view of risk to enable them to make better decisions. Mercer works with you to determine appropriate model portfolios based on a member s attitude to risk. Portfolio Analysis tool allows members to assess their financial situation, learn how their portfolio measures up against their view of risk, and create an appropriate investment strategy. Performance Analysis tool allows members to look at a complete history of quantitative fund performance data and compare across funds. Investment Research tool provides access to informed decision-making for each investment listed on the platform. My Account Forecaster tool allows members to model future expected retirement lump sum and income drawdown levels based on a number of easy-to-change variables. Set My Goal tool provides the next generation of forecasting, allowing members to set a specific savings goal. Members can track their progress and take appropriate decisions to get back on course. My Wealth Calculator tool allows members to list assets and liabilities they hold off the platform, making Mercer Smart Savings the central point for a member to track his or her individual wealth. 5

SMARTER PROCESSES AND GOVERNANCE Mercer Smart Savings processes have been designed to reduce operational risk and resource strain for sponsors and trustees. In many cases, the speed at which money can be invested is improved, and changes to fund lineups can be implemented as and when you need them at no additional cost. We provide timely information and data necessary to effectively manage the scheme and your business all with ongoing independent support from the Mercer team. HOW EVERYONE BENEFITS Sponsors and trustees Reduced operational risk. Enhanced ability to identify and respond to investment trends. Reduction in time spent evaluating different investment approaches and negotiating with managers. Real-time access to membership behavior analysis. Ongoing independent support and scheme management from Mercer. Members A secure and enhanced online employee experience. Interactive tools that educate and empower decision-making. A one-stop shop to access real-time data and interactive planning and decisionmaking tools. Significant reduction in investment processing and switching times. Employers Improved employee engagement. Flexibility to integrate your company branding, corporate identity, and value proposition. Ability to make changes when you need them. Reduction in resources required to administer the plan. 6

LEARN MORE CONTACT US For more information, please visit www.mercersmartsavings.com, and contact your local consultant: Mercer (Hong Kong) Limited 美 世 ( 香 港 ) 有 限 公 司 Alan Oates T: +852 3476 3849 E: alan.oates@mercer.com Deborah Bannon T: +852 3476 3919 E: deborah.bannon@mercer.com Simon Ferry T: +852 3476 3973 E: simon.ferry@mercer.com Adeline Tan T: +852 3476 3834 E: adeline.tan@mercer.com Christy Li T: +852 3476 3851 E: christy.li@mercer.com FIND OUT MORE ABOUT MERCER Mercer is a global consulting leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset their people. Mercer s more than 20,000 employees are based in 42 countries, and the firm operates in more than 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and human capital. With 52,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information on our global presence and capabilities, please contact your local Mercer office or visit our website at: www.mercer.com Copyright 2014 Mercer LLC. All rights reserved. 12713J-RE-010914