be ready to pay more to provide the money for non-contributory benefits? Which is better from the overall view of Government financial strategy? Contributory schemes could be self-financing: or they may include (as in the UK) a subsidy from general Government
revenue.
iii) What are the administrative implications? A contributory system, in
general, is more expensive to administer. But a non-contributory system would place more financial demands on the Government; and perhaps on employers, in respect of occupational benefits.
iv) Does the choice affect the benefits available? For example, it is
easier to justify making a non-contributory scheme redistributive (giving proportionately better benefits to the lower paid) but less easy to justify making it earnings related (relating the level of benefit to previous earnings). On the other hand, a contributory soheme may provide partly or entirely earnings related benefits and (as in the UK) include an element of redistribution.
b) Social insurance ♥ provident funds
1) Which provides a more satisfactory basis for benefits? Social
insurance provides more flexibility: it may be flat rate, earnings related or a mixture of both: whereas provident fund benefits are more likely to be determined by contributions. It is much easier to construct a social insurance scheme that will maintain the real value of the benefit rights being built up in it.
ii) What about financing the scheme? Social insurance may be funded or
pay as you go. If it is the latter, it can be brought into operation more rapidly; and deal more satisfactorily with unforeseen inflation (provided future generations are prepared to pay for the inflation proofing). Provident funds are, by nature, funded. They ought, therefore, to be self-balancing.
iii) What are the administrative implications? It is more likely that a
provident fund can be kept simple.
c) The role of occupational benefits and pensions
1) Should social security be developed entirely as a Government
responsibility or is there (and should there be) an expanded role for occupational benefits provided through the employer? Are the advantages of occupational benefits (flexibility, no call on Government financial or manpower resouroes) outweighed by the dis- advantages (potential loss of benefits on change of job, extra cost and administration for employers, problem of maintaining the value of pension rights)? Could the generality of Hong kong employers be expected to provide occupational benefits, either voluntarily or compulsorily?
ii) How far should Government run social security take
account of
occupational benefits? For example, should there be arrangements to enable existing occupational benefits (eg pensions provided to Government employees or say, bank employees) to take the place, partly or entirely, of new Government benefits (as in the UK and Japan).