Overhaul tax to fund pension scheme: expert
Hong Kong needs to change its tax system to ensure the city can support a proposed new pension scheme, a former head of the World Bank's pension team said.
Hong Kong needs to change its tax system to ensure the city can support a proposed new pension scheme, a former head of the World Bank's pension team said.
The pension expert, Yvonne Sin, said the city's ageing population meant there would be fewer Hongkongers supporting an increasing number of elderly people in the future.
The city would have to increase revenue for any new pension scheme to be sustainable, said Sin, now greater China general manager of risk and financial services at Towers Watson.
A goods and services tax might meet the goal, Sin said. "But the government has been studying this for so many years," and it still wasn't clear whether or how it would work.
"But clearly, when the population ages, the government's expenditure will definitely go up. That's not just retirement protection, but on medical issues too."
Last month, a long-awaited government-commissioned study proposed that every Hongkonger aged 65 or older get a pension of HK$3,000 a month, regardless of their means.
The study said the pension should be funded partly by contributions ranging from 1 per cent to 2.5 per cent of employees' salaries, paid by both employers and workers.
Sin said many countries, including Australia, Chile and Canada, included a means test in their pension schemes.
A universal pension plan relying on higher taxes on salaries rather than on profits would provide a more stable, predictable income, said University of Hong Kong Professor Nelson Chow Wing-sun, who led the study.
Chow's team completed, compiled and analysed actuarial calculations of five other proposals and briefly examined one other, before coming up with the suggested plan.
Regardless of how it is implemented, Chow said a universal pension plan was crucial to protect the city's elderly.
"If the government doesn't set in place a universal pension now, its spending will keep rising while people continue to fall through the cracks," he said.
