Mandatory Provident Fund (MPF)

Pensions need a longer view

PUBLISHED : Monday, 22 October, 2012, 12:00am
UPDATED : Monday, 22 October, 2012, 2:52am

Successive governments have ruled out a universal retirement pension. But recent events have revived the issue. One is the threat by some political parties to oppose funding for a boosted old-age allowance unless the government drops its plan to means test it. Another is a Consumer Council survey of MPF schemes showing that nearly half of compulsory retirement investment plans ended up in the red over the past five years, with some employees losing up to 14 per cent of their contributions. Then there is the apparent discrepancy between the reported 450,000 people receiving Comprehensive Social Security Assistance and the 1.15 million people identified as living in poverty by the Council of Social Service.

Chief Executive Leung Chun-ying's pledge to study a possible universal retirement protection scheme to ease the plight of the elderly is, therefore, timely.

Some lawmakers intend to use the vote on funding for the increased HK$2,200 special allowance to force the government to reconsider a universal scheme. They reject imposing a means test on giving the cash to everyone over 65. Now there is no means test on the HK$1,090 "fruit money" for those over 70. A universal scheme was rejected in the past in favour of the MPF scheme, the shortcomings of which are now a catalyst for renewed pressure for the pension.

From next year MPF members will be able to choose the fund in which their contributions - though not their employers' - are invested. This will introduce a badly needed element of competition in management fees, which can greatly reduce the ultimate payout. Meanwhile, the decision by the MPF authority to seek expert advice on ways to reducing fees is welcome. But contributions remain too low to provide workers with enough for a dignified retirement.

In an ageing society that can no longer depend so heavily on traditional family support for the elderly, the problem of inadequate retirement savings and the lack of a decent safety net needs to be addressed to avoid a crisis. The proposal by government advisers for an official poverty line to help shape social policy is a start.

Lawmakers of all persuasions can make a contribution by taking a longer view than the immediate issue of whether the special allowance should go to all elderly, regardless of fiscal prudence. There needs to be a community debate on the broader question of income support for the elderly.