‘Sustainability the key’ to retirement protection scheme
Financial Secretary John Tsang Chun-wah has weighed into the controversial debate on a universal retirement protection system by arguing that financial sustainability is the key to any such scheme.
In what were seen as comments supporting Chief Secretary Carrie Lam Cheng Yuet-ngor and her views expressed during the recent public consultation on retirement protection, Tsang yesterday called on the public to understand the “massive difference” in financial burden between two proposals put forward in the consultation.
“Even if the ‘means-tested’ option can’t benefit all, it doesn’t mean that we won’t improve the protection for retirees,” the financial chief wrote in a blog post yesterday.
The government launched the public consultation last month offering two options for public deliberation.
One is a universal scheme based on an idea by University of Hong Kong professor Nelson Chow Wing-sun, which has been dismissed by Lam as “unsustainable”. The other is the means-tested option which only benefits 23 per cent of the elderly population, with eligibility criteria setting an asset limit of no more than HK$80,000.
The government has put forward different scenarios for who should foot the bill. Under the universal proposal, it would mean raising profits tax by 4.2 per cent or increasing salaries tax by 8.3 per cent.
The debate has triggered a war of words between Chow and Lam, with Chow accusing the government of scaremongering and Lam countering that Chow “does not fully understand the concept and management of public finances”.
Tsang pointed out many possible drawbacks of a universal scheme run on a pay-as-you-go basis relying on contributions from the existing working population to pay for retirement funds for the elderly.
If the elderly population grows and workforce shrinks, there could be adverse consequences, including the need to raise contributions, lowering the amount of annuity or even deferring the retirement age in order to pay the rising bill for retirement protection, he argued.
“One thing we need to understand, public resources are not inexhaustible in supply. We need to discuss this issue based on the fact that public policies are confined to limited resources,” he said, adding that there were other means to improve the lives of the elderly, including enhancement of health care services, housing and transport subsidies.
“We need to exercise fiscal prudence in order to maintain healthy finances and cope with the challenges brought by cyclical economic changes and the ageing population,” he said.
