Hong Kong's state-funded pension scheme

Schemes for Hong Kong elderly must help the poor

Those who stand to benefit have welcomed the public annuity scheme from the government, but for others with no money to invest it is well out of reach

PUBLISHED : Friday, 13 July, 2018, 6:20am
UPDATED : Friday, 13 July, 2018, 9:48am

That the public annuity scheme has received a good response from some elderly people in Hong Kong is to be expected.

While it offers a good option for those seeking stable returns from retirement savings, it does nothing for many more of the elderly who have no money to invest for a better future. The need for the government to provide more comprehensive retirement protection is evident.

The much touted scheme enables those aged 65 and above to invest between HK$50,000 to HK$1 million, in exchange for a maximum monthly return – HK$5,300 for women and HK$5,800 for men – for the rest of their lives.

Hong Kong’s public annuity scheme offers the elderly no bang for their buck and ignores the poor

The accumulated earnings are expected to exceed the capital after 15 and 14 years respectively. Should the investor die during that time, the designated beneficiary may choose to withdraw the balance in one go at a discounted rate, or continue to receive monthly returns equal to 105 per cent of the capital.

To make it more attractive, officials have proposed some taxation and welfare adjustments to complement the scheme.

The good response shows there is high demand for such investment products. Many retirees do no know how best to protect their retirement savings, and the low-interest environment and high inflation mean their financial health is being eroded.

Obviously, the annuity scheme has a drawback in that it is relatively inflexible and cannot counter inflation, but the provision of a lifelong stream of modest but stable income is nonetheless a safe investment option for the inexperienced.

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As we applaud the government for giving our greying society another fallback on retirement protection, we must not forget that the scheme can only benefit certain demographics.

As in other schemes targeting senior citizens, such as silver iBonds and reverse mortgages, the beneficiaries are the ones with the means to plan ahead.

The sad truth is that retirement protection in Hong Kong is woefully inadequate. In the absence of a pension scheme for all, many are either living on the dole, or on their own meagre savings and Mandatory Provident Fund earnings.

Those who cannot afford to invest are the ones that need the most support. More needs to be done to strengthen retirement protection in our ageing population.