TNAG-0608-FCO40-756-Planning-paper-on-progress-made-on-social-security-in-Hong-K-1977 — Page 13

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G.F. 323

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CONFIDENTIAL

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administrative costs, the Government is to meet these costs. This is seen by observers outside the Gover.ment as a very si¿nificant feature of the proposals. (It also helps to meet the objection that in this scheme, unlike most social insurance schemes, there is to be no regular contribution to the scheme from public funds. At best, there will be some pump priming and low interest loans). To meet the objection that an employee could lock himself into the scheme, there will be provision for him to leave the scheme or freeze his membersniņ. Because these various features have been carefully designed for a scheme with voluntary membership, any proposal to exclude any of them would require careful consideration. Effective publicity for the scheme will have an important role to play, as it did with the launching of the exter.ded public assistance scheme in 1971/72.

b) Keeping members in the scheme

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Designing the scheme in such a way as to persuade people to remain members of it is as important as attracting them to join in the first place, because members will be able to leave it if they so wish.

The retirement benefit and housing loan facility have an important role to play here. But in addition it will be necessary to maintain the interest of members. In this, the proposal for an annual investment bonus (or some equivalent improvement in benefits) will be of value. And so might an annual statement to each member, showing how his benefit rights under the scheme were building up, and declaring the annual investment bonus that was being added to the accumulated benefit rights.

c)

Fosition of employers

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The readiness with which employers accept the scheme may well depend on t'e simplicity of the administrative arrangements for collecting contributions. Accordingly, the Government should be ready to be flexible in considering any proposals from employers organizations. In particular, the Government should be ready to consider any arrangements whereby employers made an overall contribution to the scheme, on the lines of a payroll levy, rather than a separate series of contributions related to individual contributors.

d) Benefit structure

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The benefit structure will need to be consistent with the contribution structure. There is one inconsistency at present: overtime earnings are excluded from the definition of normal pay in para. 8.14. but not from pay for the purposes of assessing contribution liability. Ferhaps overtime pay will have to be included not excluded.

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It will be desirable for the retirement benefit to vary according to length of membership in the schere so that the longer in the scheme, the bigger the sum. How far should this be achieved within the framework of the scheme will require further examination: but it is a point that should really have been mentioned in the Green Faper.