Hong Kong's state-funded pension scheme

Pension comes at a price but are Hong Kong people prepared to pay?

PUBLISHED : Friday, 22 January, 2016, 5:44pm
UPDATED : Friday, 22 January, 2016, 5:44pm

I refer to the government’s public consultation on retirement protection options. Instead of insisting that the government can afford to pay for protection for all, we should discuss as a community how much we are willing to pay for a pension.

The government presents two schemes to choose from: one that comes with a means test, and one that doesn’t. The consultation document summarises the various tax options needed to fund either scheme, from the time the scheme is implemented to 2064, without depleting our reserves.

Naturally, the more people the scheme covers, the higher the tax increase. The question is, how much are we prepared to pay?

For example, the document estimated that profits tax would need to be raised by 4.2 percentage points to pay for a universal scheme, while it has to be raised by 0.4 percentage points for a scheme with means testing.

If we aren’t prepared to pay the tax increases for a universal scheme, we should introduce means testing, and discuss the requirements. What maximum asset (excluding primary residence) should be allowed to qualify for a pension?

The government’s proposed maximum asset value of HK$80,000 is ridiculous. I would propose a maximum of HK$210,000 at 65, and HK$540,000 at 70, to qualify for the scheme. The maximum asset figure of HK$540,000 was obtained by assuming HK$3,000 per month is enough for basic needs, and one expects to live to 85.

If we agree to these criteria, the tax increases estimated by the government for a scheme with means testing will be much higher than the figures it gave in the consultation document, but still less steep than that required to fund a universal scheme.

It’s time to move away from the stand of some academics, democratic legislators and trade unionists: the government can afford it, and the only reason it refuses to give us a universal retirement scheme with no means test is because it is mean.

Alex Woo, Tsim Sha Tsui