Employees' contribution (per attached chart) Employers' contribution
Savings from Old Age Allowance
Savings from Public Assistance (HK$931m * 70%) Net savings in Social Welfare Department
HK$ billion
4.0
4.0
1.7
0.7
0.2
10.6 (10.4)
Cost in 1991
Surplus
0.2
To prevent undue hardship among the very low paid, only workers with an income of HK$3,000 or more would have to contribute. The self-employed would contribute a flat HK$150 per month. See attached chart.
The aim would be to bring income and expenditure of the scheme into
ough balance over the medium term, to avoid the accumulation of large reserves. It may become necessary to increase the level of contribution in future years as Hong Kong's elderly population increases. However that will depend to some extent on economic growth. A contribution of 2% of wages is in any case very much lower than that in most other countries operating similar schemes.
The intention is that the pension would over the medium term follow the trend in median earnings. The pension should at least be
index-linked. It would be desirable to raise the pension level to a higher percentage 45% of median earnings being the norm in many developed countries. We hope improvements may be possible as social conditions allow.
The old age pension would be administered by the SWD. Actual payments to pensioners would be made through post offices, as the Old Age Allowance is paid out at present. The administration of the scheme would be relatively simple as no means testing or evaluation of claimants would be involved.
Collection of contributions would be through the present system for collecting taxation. Ideally, contribution from the employee would be deducted from pay monthly, or weekly, and forwarded together with the employer's contribution to the Inland Revenue Department (IRD). The IRD would be able to control receipts through the statutory cessation and commencement of employement form that employers are already required to complete. Collection of contributions should not present particular problems.
The Foundation believes that the above old age pension scheme will enable Hong Kong's elderly to live in dignity without undue cost to society as a whole. Prosperous Hong Kong owes a debt to its elderly citizens, who during their working lives built the territory into the successful business centre that it is today. The establishment of a universal old age pension is an essential step in Hong Kong's progress towards the status of a developed society.
· 6