Affluence test: Assess the Hong Kong rich not the poor for pension scheme, says World Bank expert
Robert Palacios says the test should be made to exclude the well-off from a future pension scheme; he also criticises the Mandatory Provident Fund offset mechanism
Instead of stating how poor someone should be to qualify, Hong Kong could discuss how the rich could be excluded from its pension scheme, said a World Bank expert on retirement protection.
Senior World Bank pension economist Robert Palacios also expressed concern over the Mandatory Provident Fund’s offset mechanism, where an employee’s severance pay can be offset by the contributions made to his or her retirement funds. He said the mechanism undermined the effectiveness of the city’s retirement protection plans.
Six ways Hong Kong could fund a universal pension scheme
Hong Kong has been debating setting up a pension scheme since the 1990s. The current administration launched a public consultation on the issue, which is to end in June. Much of the debate so far has focused on whether Hong Kong should have a universal pension scheme or not, with the government in favour of a means-tested one.
“The well-off don’t need it,” Palacios said, and an affluence test could minimise the traditional stigma surrounding welfare.
His assessment that a pension should be targeted towards the poor matches the government’s direction. The government has held various public consultation sessions where Chief Secretary Carrie Lam Cheng Yuet-ngor labelled any universal pension plan as “too costly”, while touting a means-tested payment for those with assets of HK$80,000 or less – a suggestion labelled as stingy as only 23 per cent of elderly people would qualify for the HK$3,500 monthly pension.
However, instead of drawing a line at how poor someone needs to be in order to be eligible for a pension, Hong Kong could think of using an “affluence test” to eliminate the wealthy, Palacios told the media at a pension forum organised by an NGO but hosted at the government headquarters.