THE Government's apparent U-turn on pensions - the Executive Council's decision is expected to be announced this afternoon - is unlikely to mark the end of the controversy over the administration's responsibility for guaranteeing the welfare of the territory's elderly. Having rejected repeated Legco calls for a central provident fund (CPF), the Government is likely to propose an old-age pension scheme based on compulsory contributions by workers and employers. The details of the Government's proposal should be made public today but the suggested privately based, but compulsory, pension scheme is dangerous. A pension system differs from a private, but compulsory, retirement benefits scheme in that the former sets a level of payment not necessarily related to contributions. Political considerations can set the pension far beyond the capacity of contributors' payments to meet the cost. The difference can be made up in only one way: by soaking the taxpayer. By contrast, a retirement benefits scheme, with compulsory contributions and transferable as the worker moves from job to job, cannot outrun its contribution base. The initial problem with any scheme would be the time it would take to build up sufficient funds for individuals to reap any meaningful reward for their contributions. Workers now approaching pensionable age would not benefit significantly. But as Western experience shows, a public pension programme risks becoming a huge burden as the population ages. This makes a central provident fund an unacceptable option. China has hinted it is prepared to support such a fund, despite the fiscal burden it would be for the future Special Administrative Region government. Yet fears of what the SAR might do with such a sum are believed to be part of the reason for the administration's reluctance. On both sides these are political considerations, designed to undermine the credibility of the other. But both sides are aware of the damage a CPF would do to Hong Kong's low-tax regime. Only a compulsory, private system, paying benefits related to contributions, can satisfy the twin political necessities of a social safety net and fiscal prudence.