White Collar

Is 60 too young to retire? Bismarck would definitely agree

Faced with a greying population, there are talks of upping the retirement age in Hong Kong. But when should we retire?

PUBLISHED : Monday, 05 February, 2018, 7:03am
UPDATED : Monday, 05 February, 2018, 11:35pm

Faced with an ageing population, there are talks of delaying the retirement age in Hong Kong. Although there is no such thing in Hong Kong, many companies ask their staff to retire at 60, while some such as accounting firms and the government have set the bar even lower at 55.

But participants in Hong Kong’s compulsory retirement scheme, the Mandatory Provident Fund, can only get their hands on their retirement savings when they turn 65 years old.

Whether the retirement age is 55, 60 or 65, it should come as a small consolation that the retirement age for the world’s first mandatory retirement scheme was initially set at 70 in Germany.

The retirement protection system established by Chancellor Otto von Bismarck in 1889 is often considered as the first formal mandatory pension system worldwide.

Introduced by Bismarck for blue-collar and low-paid white-collar workers, the mandatory scheme required both employers and employees to make contributions while the government added a small flat-rate subsidy.

But only a few workers could enjoy the retirement benefits as the average life expectancy in Germany then was around 45 years. Besides in 1891, there were only 11.5 million workers out of a total population of 49 million, which meant that only one in five was covered by the retirement protection system, according to data available from Hong Kong’s Mandatory Provident Fund Schemes Authority. 

But these days the situation is different as most people live much beyond the retirement age.

In 2016, the average life expectancy in Hong Kong was almost twice that of the Bismarck era, with 81.3 years for men and 87.3 years for women. The Hong Kong government estimates that men and women would live longer – 87.1 and 93.1 years respectively by 2066.

This raises two questions. Should we still keep 65 years as the retirement threshold given that people could live 20 or 30 years after getting hold of their MPF?

The second issue question arises from the first, and that is, the current MPF is definitely not sufficient. Should the contribution amount be increased and whether the government should also pay a subsidy? Mind you that the Bismarck scheme also saw the government make a small contribution.

To cope with the financial needs for the increasing number of pensioners in Hong Kong, the government should also appoint a senior leader to handle this issue well.