A workable retirement safety net must use means testing
Updated: 2015-12-23 08:08
By Peter Liang(HK Edition)
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The government consultation paper on universal pensions for the elderly offers two options for public discussion. To most people, especially those aged from 20 to 40 years, the choice seems obvious.
A universal pension scheme would put too much of a financial burden on future generations of working people, as the population is aging fast. With a shrinking workforce contributing to the scheme, the government would have to shoulder the increasing burden of funding it by drawing on the reserves.
Based on projected demographic shifts in coming years, it has been estimated that the fiscal reserves will run out in less than 20 years. Instead of allowing the severe drain on the reserves, which are essential to covering the seasonal budgetary shortfalls and stabilizing the currency when necessary, the government would have no alternative but to raise corporate and personal taxes, or introduce some form of indirect taxation such as a sales tax. These have been vigorously opposed by a wide section of society.
Other than the issue of financial sustainability, a universal pension scheme also raises the question of fairness in the distribution of public resources and the basic tenets of the government social welfare policy, according to Chief Secretary Carrie Lam Cheng Yuet-ngor.
Results of a recent government study show that nearly 30 percent of elderly aged 65 and above live below the poverty line. But the study is based solely on income. The study has failed to take into account that many elderly people falling below the poverty line own assets - mainly savings and properties.
The government has said that about 50 percent of the elderly who fall below the poverty line based on income have indicated that they do not face financial difficulties. Therefore, some form of means test, as proposed by the government, can help ensure a more equitable and affordable pension scheme which applies only to the neediest.
When we make a choice, it is important to bear in mind that our economic base is not expanding as fast as we would like and our population is aging rapidly. It is not fair to lay too heavy a burden on future generations.
(HK Edition 12/23/2015 page7)