Too little, too late?
How much money will you need to live on when you retire? It depends on circumstances, lifestyle, expectations, and other factors. How much will you actually get? For many Hong Kong people, the answer to this question is much clearer: not enough. There are several reasons why.
For a start, what might have been 'enough' in the past will not be enough in the future. Workers today quite rightly expect higher living standards than people did in the past. Also, they will live longer: 78 years for men and 84 for women. Indeed, life expectancy will probably continue to rise, thanks to future medical breakthroughs. All these factors will push up the cost of retirement.
In addition, Hong Kong is an expensive city where even during their working lives many residents need subsidised housing and other services. And then, perhaps, there is a weakening of the traditional role of the family in supporting the elderly.
So, a lot of Hong Kong people will find out too late that they have too little for a comfortable retirement. If you earned an average of $10,000 a month (the median salary) from the ages of 20 to 65, you and your employer would have contributed a total of $540,000 to your Mandatory Provident Fund account. Assuming that the money had been invested sensibly (and ignoring inflation), that might have grown to something in the region of $1.5 million by the time you retired. Is that enough? On its own, it probably is not.
It will not be realistic for the majority of us to expect the government to step in. The proportion of over-65s in the community is expected to virtually double, to 24 per cent, by 2031. The taxpayers of the future will find it hard to provide all the health care and other services needed by such a large part of the population. Already, public facilities for the elderly are stretched.
Hong Kong is not alone. In the US, President George W. Bush has declared that the social security system is heading for bankruptcy, and is pushing a controversial plan to give workers more control over their retirement accounts. In Japan and some European countries, there could be two retirees for every three workers by the middle of the century, and current public pension systems will not be viable.
There is some good news. Healthier, fitter people can work longer. If people work up to the age of 70, or if they gradually decrease their workload at that stage of their career, rather than suddenly retiring at 60 or 65, it changes the arithmetic quite a lot. Of course, this only applies to people who have skills that are in demand.
Then there is migration. Hong Kong already attracts workers from overseas, and if we suffer a local labour shortage in the future, there will be people of working age elsewhere in the region willing to come here. At the same time, many of our retirees might choose to live outside Hong Kong, especially in the mainland, where their savings will go much further.
So, the picture is not all gloomy. But the fact remains that many Hong Kong people working today are not saving and investing enough. Some of them are on low salaries and simply cannot. But many more are poor savers, especially when they are younger. And, unfortunately, many are bad investors, trading hot 'concept' stocks or speculating on warrants or currencies instead of gradually building up a solid, long-term portfolio.
The bottom line is that we do not face a crisis. But many people now in their 20s, 30s and 40s will have a less comfortable retirement than they would like. They will look back and regret not having saved more today.
Bernard Chan is a member of the Executive Council and a legislator representing the insurance functional constituency
