Ageing Hong Kong must ensure quality of life for its elderly, and new annuity scheme ticks many boxes
Paul Yip says a universal pension system cannot depend on the government to pay all the costs, and the planned risk-free scheme, together with other allowances, will go a long way to financially protect retirees
The government’s planned public annuity scheme provides an option for older adults to invest a lump sum in exchange for a guaranteed monthly income for the rest of their lives.
People aged 65 and above will be able to invest between HK$50,000 and HK$1 million under a life annuity scheme to enjoy a 5-7 per cent rate of return, which is better than all existing similar products in the market. It is also very appealing as there is no management fee or surrender charge, and beneficiaries are entitled to 105 per cent of total premiums,less any monthly annuity paid, in case of death.
If you live to be older than 82, you can actually earn more. A projected life table for older adults puts life expectancy for 65-year-olds in 2017 at 20.10 years for males and 24.47 for females. Hence it is anticipated that at least 50 per cent of the elderly can enjoy the extra return due to their long lives.
Hong Kong is ageing fast, with 14.5 per cent of its population aged 65 or above at present, and this is forecast to increase to about 30 per cent by 2050. Therefore, care and support for older adults has become an important social and public health challenge. Nevertheless, the incoming cohort of older adults would be financially better off than the earlier one.
A risk-free retirement protection scheme would be suitable for this type of population. If our aim is to provide universal retirement protection, we don’t have to insist on the government paying all the costs.
At present, social services already use up to 16.5 per cent of government expenditure. Due to budget constraints, any universal pension scheme amount will not be enough for those who really need the money; whereas for those who don’t need the money, it would not make much difference to their quality of life whether or not they have the pension.
In this proposed scheme, the government can redeploy some of its resources to other areas, or it might also be able to increase the payout amount for those who really need the support. For those who can support themselves with the annuity scheme, the standard of living will be somewhat “protected” by the monthly annuity return.
The underwriting of this annuity scheme is very much an expression of commitment by the government.
The government has already set up an old age allowance scheme: those with assets below HK$329,000 will receive HK$2,565 per month, while those owning less than HK$144,000 in total assets will be eligible for a higher monthly allowance of HK$3,435. This scheme, set up earlier this year, is estimated to already cover half a million older adults.
There is also an additional non-means-tested allowance of HK$1,325 a month for those aged 70 or older. Along with the proposed annuity scheme, the amount to be received by older adults would be able to meet the standard of a universal pension.
The important thing is to ensure a close monitoring of the scheme and that the demand for it can be met. Hence, the total size of HK$10 billion should be reviewed from time to time.
The focus of universal retirement protection is to ensure the quality of life for older adults can be sustained. We don’t have to rely on one way to solve the problem. We need to be more creative in dealing with some of the issues in Hong Kong; a co-creation of this type should be promoted and welcomed.
If we can further improve health-care services and housing provision, well-being in Hong Kong can definitely be improved.
Paul Yip is chair professor (population health) in the Department of Social Work and Social Administration at the University of Hong Kong
An earlier version of the piece mis-stated social services’ share of government expenditure. It should be 16.5 per cent, not 20 per cent.