The lowest fertility rate in the world is exacerbating the problem and the government must act quickly EARLIER THIS YEAR, Secretary for Health, Welfare and Food York Chow told legislators that the government was reviewing Hong Kong's retirement income protection structure and studying options for new sources of funding. The initiative comes on the back of growing concern about the rapidly ageing population and the possibility of mass retirement in the near future. Hong Kong is not alone in its predicament. Many countries are also just starting to face up to the problem of rapidly ageing populations. Researchers estimate the elderly accounted for no more than 2 or 3 per cent of the world's population for most of human history. That figure has reached about 15 per cent in the developed world, according to some estimates. The United Nations predicts that by 2030, a quarter of the world's population will be aged 65 years or more. A recent study on population change released by the Civic Exchange, an independent think-tank, said that Hong Kong's ageing problem might be particularly acute. Aside from longer life expectancies - life expectancy has lengthened to 78 years from 72 for men and to 85 years from 79 for women - Hong Kong's fertility rate has dropped alarmingly and is the world's lowest. 'The total fertility rate [TFR] has plummeted from the replacement level [two children per woman] to 0.8, which is the lowest in the world,' the report said. The Civic Exchange blamed the lower fertility rate on fewer marriages and more late marriages. The government predicts that by 2031, almost 27 per cent of the population will be aged 65 or above. But there is more to the ageing problem than the increasing number of people reaching the age of retirement. A rapidly falling ratio of the working-age population (15-59 years) to the retirement-age population (60 years or older) is also worrying. This ratio will fall sharply to 1.6 in 2033 from 4.6 in 2003, the report warned. Nelson Chow of the University of Hong Kong's Department of Social Work and Social Administration, said the problem of an ageing population had been staring Hong Kong in the face for decades. 'It is only now that the government has started to recognise we are going to have a problem dealing with an ageing population. I have been advocating action in one form or another for 30 years.' A long-time advocate of pension reform, Professor Chow tried to convince a succession of British governors to launch a publicly funded basic retirement income protection scheme. When it became clear that a pay-as-you-go system would not receive the support of the public, he proposed a central provident scheme to legislators in the '80s. It was only in 2000, with the launch of the Mandatory Provident Fund, that his efforts started to bear fruit. But the MPF is widely considered to be inadequate to meet Hong Kong's retirement income protection needs. 'Our studies show the MPF provides an income replacement ratio of less than 30 per cent based on the median salary in Hong Kong, which is only $10,000,' he said. Professor Chow said the MPF did not provide financial protection for the whole population. 'A pension system should not be gender specific, but the MPF does not provide for housewives. Who will support them when they grow old?' he said. Hong Kong had a social safety net consisting of the Comprehensive Social Security Assistance and Old Age Allowance programmes, but the financial support these schemes provided was paltry, Professor Chow said. A study by the Hong Kong Investment Funds Association last year suggested the government bring in basic retirement income. Professor Chow said that while the idea was nice, it was unlikely to happen. 'It is not a question of should we, but can we. In principle, I would support the creation of a basic pension system, but who would pay for it?' Francine Fu, regional director (Far East) for Royal Skandia Life Assurance, believes the answer lies in more public education about retirement planning. She also said that introducing more choice and flexibility into the MPF might encourage people to contribute voluntarily.