Singapore pension scheme downgraded, as Hong Kong ponders reform
Author: PM editorial | Date: 21 Oct 2015
Scheme receives C+ rating due to change of calculation; Hong Kong chief executive sceptical over universal pension
The Singapore national retirement saving scheme has been downgraded by an influential global index, though it remains the best-funded and most reliable in Asia.
The Melbourne Mercer Global Pension Index changed Singapore’s rating from a ‘B’ to a ‘C+’ as its overall score fell from 65.9 in 2014 to 64.7 today. The change is largely technical, reflecting a reduction in the level of savings relative to national GDP, and the city-state remains the leading national pension fund in Asia: Mercer praised the Central Provident Fund for recent changes, including an increase in the wage limit.
The news came as the acting chief executive of Hong Kong said the government was sceptical about the potential for introducing a universal pension in the country. Carrie Lam Cheung Yuet-ngor was reported by The Standard to have said a universal payment for over-65s – around 300,000 of whom live below the poverty line – may be financially unsustainable and incompatible with the government’s welfare policy.
The idea of a universal pension gained traction after Professor Nelson Chow Wing-sun of the University of Hong Kong was commissioned by the legislature to investigate options for reducing poverty among the elderly population. He recommended every resident aged 70 and over should receive HK$3,000 per month, to be funded by the government. The amount would not be means-tested, and no employee or employer contributions would be required.
Chow has since said he doubts the likelihood of the government acting on his proposals, and suggested it should withdraw them from a public consultation on the topic due to begin in December. But Lam has indicated the consultation will consider a universal pension as part of a “holistic, objective” exercise.
The state of pensions provision has become a hotly debated topic across Asia, as governments grapple with the consequences of ageing populations and wildly differing rates of savings. Malaysia introduced a Private Retirement Scheme in 2012 to help workers fund their retirements. They can receive up to RM3,000 a year in income tax relief for taking part.