Debate over universal pension in Hong Kong rages on
Author: Liana Cafolla | Date: 10 Feb 2016
Critics claim government has ‘already decided on means-tested scheme’ despite consultation period
The debate about a universal pension is heating up in Hong Kong, with opinion divided on whether the city should have a means-tested scheme or a truly universal pension.
The government is facing claims from critics that the six-month consultation period, which was launched in December, is a sham as they believe it has already decided on a means-tested pension with an asset threshold of HK$80,000.
This limit would cover an estimated 23 per cent of Hong Kong’s senior citizens. The threshold figure is considered too low by many, including the government’s Commission on Poverty, which is in charge of the consultation.
In response, the government says this figure has been provided for reference only, and is not an official proposal. It says it already spends HK$61 billion annually on elderly care, including medical, health and various allowances, an increase of 45 per cent from HK$42 billion three years ago. At the other end of the scale, it calculates that providing all elderly people in the city-state with a monthly pension of HK$3,000 would necessitate a 4.2 per cent rise in profits tax.
The government says it is open to suggestions and welcomes views from the public before the consultation period ends on June 21.
A variety of solutions on pensions have been reached in other Asian countries. “While it is challenging to directly compare the retirement systems of different countries, many countries in Asia have a publicly managed mandatory contribution plan, such as South Korea, Japan and China,” says Simon Ferry, Mercer’s retirement business leader in Hong Kong. “In most cases, the amount of benefit provided will vary by individual, perhaps relating to the contributions they have made, the length of time they have participated in the plan, or their salary at retirement or over their working lifetime. Pensions systems which provide a fixed amount to participants are rarer, although they do exist, such as the Age Pension in Australia which provides a flat rate benefit. But it also involves means testing, so medium and higher earners do not qualify.”
A universal pension that includes a contribution or participation requirement would likely exclude those who have not had paid work for all or part of their working lives prior to retirement. In Hong Kong, those who find themselves disqualified from a universal scheme could consider applying for other forms of government-funded retirement support if they qualify. These include the Comprehensive Social Security Assistance Scheme, which pays out between HK$3,667 to HK$10,462 monthly to about 173,000 elderly people; the Old Age Living Allowance, which was introduced in 2013 and benefits about 430,000 people who receive HK$2,390 per month; and the Disability Allowance.
“They may also need to rely on other support, such any savings or assets they have and on any family assistance which can be provided,” says Ferry.