XN000022-1978-04-26 — Page 9

WEDNESDAY, APRIL 26, 1978

HE PREDICTED THAT IT WOULD BE FOUND NECESSARY TO MAKE THE SCHEME COMPULSORY AND SUGGESTED THAT IT MIGHT, IN 1982, BE EASIER TO INTRODUCE A FULL CENTRAL PROVIDENT FUND. IT WOULD BE PROFITABLE TO USE THE TIME BETWEEN NOW AND 1982 TO BEGIN LOCKING AT PROVIDENT FUND SCHEMES AND MAKE A PRELIMINARY DECISION ON WHICH TYPE MIGHT BEST SUIT HONG KONG, HE SAID.

FIVE OTHER UNOFFICIALS SPOKE ON THE SCHEME DURING DEBATE ON THE MOTION.

THE HON, JAMES WU NOTED THAT INDUSTRIAL AND EMPLOYERS' ASSOCIATIONS AGREE IN PRINCIPLE WITH THE TYPE OF BENEFITS PROPOSED BUT HAVE THE FOLLOWING RESERVATIONS AS TO ITS IMPLEMENTATION:

* THE PROPOSED SCHEME DOES NOT PROVIDE A RETURN EQUIVALENT TO

CONTRIBUTIONS. THE SIX MONTHS SALARY 'RETIREMENT' BENEFIT GIVEN TO A CONTRIBUTOR WHO DOES NOT QUALIFY FOR SICKNESS,

INJURY OR DEATH BENEFITS WOULD BE LESS THAN HIS TOTAL CONTRIBUTIONS AND WOULD BE INSUFFICIENT TO RETIRE ON.

*

IT IS DOUBTFUL WHETHER A VOLUNTARY SCHEME IS ACTUARIALLY VIAELE, AS THE SCHEME NOW STANDS, THE OLDER AGE GROUP WILL TAKE ADVANTAGE WHILE THE YOUNG WHO IN EFFECT WILL BE SUPS IDISING THE SCHEME, WILL STAY OUT.

* THERE IS SOME UNCERTAINTY AS TO WHETHER A GOVERNMENT

ADMINISTERED SCHEME OF THIS NATURE WOULD OBTAIN A BETTER

INVESTMENT RETURN ON MONEY ACCUMULATED THAN BY PRIVATE INSTITUTIONS.

* LIKE THE RETIREMENT BENEFIT, THE DEATH BENEFIT IS OF LITTLE

SIGNIFICANCE. THE AMOUNT CONTRIBUTED WILL RESULT IN A LESSER RETURN UPON MATURITY UNLESS ONE DIES EARLIER.

* SICKNESS BENEFIT WOULD ONLY BE PROVIDED IF A WORKER IS

SICK OVER 36 DAYS. FROM EXPERIENCE HOWEVER, THE NUMBER OF PERSONS WHO ARE LIKELY TO BE SICK FOR LONG PERIODS OVER 36 DAYS ARE FEW AND FAR BETWEEN.

**

THE VERY SMALL AMOUNT OF ACTUAL BENEFITS TO BE DERIVED FROM THE SCHEME UNDER THE CIRCUMSTANCES RAISES DOUETS AS TO WHETHER IT WOULD BE COMMENSURATE „ITH POSSIBLY LARGE ADMINISTRATIVE COSTS.

* BY WAY OF COMPARISON, PP IVATE INSURANCE INSTITUTIONS ARE

CAPABLE OF PROVIDING SUCH IENEFITS AT A MUCH MORE SUBSTANTIAL RATE.

THE HON. HILTON CHEONG-LEEN SUGGESTED THAT THE WORDS +DEATH BENEFIT+ COULD BE MORE APPROPRIATELY AMENDED TO +SURVIVORS' BENEFIT+.

HE THOUGHT THAT THE PROVISICI PROPOSED FOR A SMALL RETIREMENT BENEFIT OF ABOUT 6 MONTHS PAY ON REACHING THE AGE OF 60 COULD WELL BE THE STARTING POINT FOR THE EXPANSION OF THE SCHEME AT A LATER DATE INTO A MONTHLY PENSION PLAN.

HE ALSO QUERIED WHETHER IT IS ADVISABLE TO ALLOW EMPLOYERS TC CONTRACT OUT, UNLESS THE BENEFITS OF THE IR OWN. SCHEMES ARE CLEARLY BETTER.

HE SAID