Government may contribute up to 25pc of employees' salaries

A civil service provident fund to which the Government would contribute up to 25 per cent of an employee's salary has been proposed to replace the present pension scheme. Officials conceded the business sector might find the rate too generous, but said public money would be saved. The move to phase out the pension scheme is part of the civil service reforms ordered by Tung Chee-hwa in March 1999 to make the bureaucracy more efficient. Civil servants are currently entitled to a lump sum on retirement, plus a monthly pension amounting to roughly one-third of their monthly salary. The total cost in the next financial year is expected to be about $12 billion. The Government called in consultants to devise alternatives. One of the options proposed in a consultation paper released yesterday calls for a provident fund scheme under which the Government would contribute 17 per cent of staff salary while employees pay five per cent, the same as in the Mandatory Provident Fund, introduced on December 1 last year. The other option suggests increasing the contribution progressively from five per cent at the beginning of service to 25 per cent after 20 years or more. Depending on the years of service, officials would pocket an amount equal to 85 times monthly salary when they retired. Announcing a three-month consultation on the two options, Secretary for Civil Service Joseph Wong Wing-ping said the five per cent required by the Mandatory Provident Fund scheme was not attractive enough for the civil service. 'We believe that it is important from our policy consideration to attract and retain quality staff. So we believe on top of the five per cent, the Government should provide additional contributions,' he said. The disciplined services would get another 2.5 per cent because their retirement age is generally lower. Existing civil servants will not be affected and cannot switch to the new scheme, scheduled for implementation from 2003 onwards. About 300 staff recruited since last June will come under the new scheme after probation. Under the new scheme, Chief Secretary for Administration Anson Chan Fang On-sang, who announced her resignation last week, would have got a one-off payment of $17.5 million to $18.4 million, depending on the options. Under the old scheme she will pocket $12 million and is entitled to a monthly pension of about $70,000 until death. Civil Service Bureau figures show pension payments account for 22 per cent of the total staff salary bill, but are expected to drop to 18 per cent under the new system. It is estimated the contributions will account for 2.3 per cent of government expenditure by 2045, roughly $4 billion. Mr Wong denied the scheme was designed to save money. 'Depending on the annual number of recruits in future, the Government would have to set aside a considerable amount of money as contributions each year.' Eddie Ng Hak-kim, external affairs director of the Hong Kong Institute of Human Resources Management, welcomed the proposal, saying it would lessen the financial burden on the Government in the long run. He said the contribution rate was above average for the private sector and the level was reasonable to attract talent. Mr Ng said the contribution rate could be adjusted to retain talent, too. For example, the progressive rate could be offered to jobs with more competition from the private sector, while the standard rate could be applied to those with less. Pang Tat-choi, chairman of the Senior Non-Expatriate Officers' Association, said it was reasonable for the contribution rate to be higher than the private sector's. But he said employees should be allowed to take the money after working for 10 years, instead of only on retirement. Peter Wong Hyo, vice-president of the Chinese Civil Servants' Association, urged the Government to release more details, including the financial burden for the Government under the provident scheme and the pension scheme. He was worried the proposal would be divisive. 'It proposes the disciplined services should enjoy a higher rate than the civilian grades. It affects the stability of the civil service,' he said. Leung Chau-ting, chairman of Federation of Civil Service Unions, said both options were attractive but urged the Government to clarify under what conditions its contributions would be deducted on disciplinary grounds. BOWL17GET