Universal pension? It's all up to the chief executive now

There has been a trend of chickening out when it comes to the acute need to tackle the rising poverty among Hong Kong's elderly people

PUBLISHED : Tuesday, 19 August, 2014, 4:18am
UPDATED : Tuesday, 19 August, 2014, 5:31pm

Universal pensions are a minefield where the colonial government once trod with trepidation, mindful of resistance from businesses and Beijing. Now, after more than 40 years of debate, the issue has dropped in the lap of Chief Executive Leung Chun-ying's administration.

And whether a universal pensions scheme will finally come to pass, proponents say, all depends on the political will of Leung's administration.

As a social sciences scholar prepares to present his findings on the feasibility of such a scheme tomorrow, advocates worry that the government will continue a trend of "chickening out" of launching much-needed social policies - despite rising poverty among the elderly.

At the centre of the government-commissioned report are six proposed retirement protection schemes, whose costs, sustainability and funding options have been examined in actuarial studies. Nelson Chow Wing-sun, chair professor at the University of Hong Kong's department of social work and social administration, wrote the report.

"We worry about the government's next step - or whether there will be a next step," said Au Yeung Kwun-tung, organiser of the Alliance for Universal Pension, which represents more than 80 grass-roots groups and stakeholders, including housewives, the elderly, young workers and NGOs.

The government had offered no hint in the past few months that any action would follow the report, Au Yeung said.

He hoped the "acute" needs of elderly residents would not be forgotten amid the city's fevered debate on democracy and electoral reform in the 2017 chief executive election.

The longer the government shied away from protecting the elderly, the bigger the problem would become, he said.

"Fire can never be wrapped in paper," he said. "The longer the issues of increasing elderly poverty and a lack of retirement protection are not tackled, the more money the government will need to spend in the future."

Economic growth is also at risk. With more people retiring than entering the workforce, the city's labour force will peak in 2018, then fall 6 per cent by 2031, according to estimates in the government's consultation paper on population policy in October.

Based on 2011 statistics, the government projected over 30 per cent of the population would be more than 65 years old in 2041. The median age is expected to rise from 42 in 2011 to 52 in 2041.

To build a sustainable pension programme, the Civic Party has proposed initial funds of HK$50 billion, to be drawn from the government's budget surplus. This would be followed by an injection of HK$50 billion in government funds every five years until 2060, the party said.

HKU professor and demographics expert Paul Yip Siu-fai questioned if the working population would be able to support retirees, substantial government funding notwithstanding.

"Even with HK$50 billion of seed money, it is important to discuss where else the money will be coming in from," Yip said.

"We know where the money will go - we have done projections on the number of elderly people - but do we know and can we ensure that money will come" into the pool? He added: "The bottom line is, it's always better to have [a pension scheme] than not to have one."

Yip calculated that in order for Hong Kong to maintain its economic output, productivity would have to increase annually by 3 per cent from 2018, to offset the effects of a smaller workforce.

The city's struggle for a comprehensive retirement protection policy dates back to the 1970s, when discussions first arose over the possibility of setting up pensions for retirees.

But no colonial governor dared to tackle it until Chris Patten revived the idea in 1994 - only to shelve it in the face of opposition from business and Beijing.

The setback was followed by Beijing stalwart Chen Zuoer's attack on welfarism in Hong Kong in 1995 when he headed a mainland team scrutinising the city's budgets. Chen, who later became deputy director of the Hong Kong and Macau Affairs Office, compared the Patten administration's surge in welfare spending to a speeding Formula One racing car "which is going to crash and kill all six million people in Hong Kong".

Instead, the Mandatory Provident Fund got past a Legislative Council vote that year and started operating in 2000, as a compromise solution to retirement protection for workers.

Employees contribute 5 per cent of their monthly income and the government matches that with 5 per cent. The money goes into the employee's personal account and can be withdrawn as a lump sum upon retirement.

The fund is highly criticised as flawed, as many people fall outside its safety net - housewives, the unemployed, low-income earners and vulnerable groups.

Yip said 30 per cent of MPF members had wages so low that their take-home pay could not even cover their expenses.

So, universal pensions should still be the way to go - but Labour Party lawmaker Lee Cheuk-yan wonders whether Chow's entire year-long research into the subject will end up as nothing more than a window-dressing exercise by the government.

"We worry first of all that the government has tweaked the report - that we're getting a watered-down version of the original one [Chow] wrote," Lee said.

"After we get the report, then we'll worry whether the government has the political will. But at least if we get the full and uncensored report, we could lobby, pressurise and hold the government accountable."

Lee said the Leung administration had a history of backing out of promised social policies - reviving the idea of building an incinerator and shelving the "Hong Kong land for Hong Kong people" policy, for instance.

"They tend to chicken out on anything with a bit of controversy now," Lee said. He suggested that in the absence of any concrete policy, the government should set aside HK$50 billion for retirement protection.

Fellow lawmaker Peter Cheung Kwok-che, representing social welfare, agreed political resolve was the biggest barrier.

"If the government really wanted to do it, it would put forward a compromise [one way or another]," he said. "The whole government, especially our chief executive, shouldn't be looking at just a single issue in what it has to deal with. If it cannot thrash out political differences, it at least needs to try harder on livelihood and social policies."

What would be telling would be the government's reaction after the release of the report, Cheung added.

Au Yeung's alliance is lobbying for a road map to universal pensions in Leung's next policy address, in February.

If the government was smart, he said, it would advocate a good retirement shield that benefited the public so as to score brownie points in a currently tense and divided political climate.

The alliance's bottom line was to have no means test, to avoid creating a labelling effect or polarisation in society, he said.

Chinese University economics professor Chong Tai-leung said universal pensions with no means test were "not possible" without major changes in taxes or more employee-employer contributions.

Chong said it would not be fair to the young working class, who would be feeding not only their families but also more of society's elderly. "It's not worked anywhere in the world," he said.