TNAG-2671-FCO40-3868-Future-of-Hong-Kong-Sino-British-Joint-Liaison-Group-retirem-1993 — Page 12

CONFIDENTIAL

XCC(93)17

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Employers' reactions are likely to be mixed. Those employers who already provide retirement schemes would not welcome the additional contributions under a universal old age pension system. Others, especially the small employers, may favour it if the rate of contribution turns out to be lower for them, compared to that under a RPS or a CPF.

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Others might be worried that the move represents the first step towards a policy of redistributing wealth, and will see it as a departure from the long-standing tradition of not using taxation for social engineering

purposes.

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Given the previous media and political focus on a CPF, the decision will catch many by surprise. The political parties will be suspicious. Some will see the announcement of a feasibility study at this late stage as another delaying tactic, and accuse Government of dragging its feet. The UDHK and Meeting Point, while supporting a universal pension in the long term, might question Government's motive in trying to tackle the most difficult and controversial option head on. They will, however, find it difficult to oppose the scheme publicly. The Liberal Party, which has already declared its support for a CPF, will face the dilemma of juggling the interests of its business supporters who may prefer the universal pension scheme because it is cheaper, and the opposition of the middle class and professionals whose support they are vigorously cultivating.

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Some will be confused by the decision to start a feasibility study on an old age pension in parallel with continuing efforts to promote voluntary retirement protection schemes. Many will be reluctant to join voluntary schemes while the study is in progress, to avoid having to pay double contributions in future.

PUBLICITY

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If the recommendation is accepted, a press conference will be held to announce the decision. Background papers setting out the pros and cons of each option, and illustrating why the preferred option is the most acceptable, will be distributed. The press conference will be followed by both on and off the record briefings as necessary.