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LCQ3: Retirement protection

     Following is a question by the Hon Ip Wai-ming and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (November 25):


     It has been reported that in order to enhance retirement protection for the public, the Government of Macao has recently launched an initiative of opening personal accounts under a centralised savings system for eligible permanent residents of Macao aged 22 or above and will annually inject part of its fiscal surplus into these accounts, but the residents cannot withdraw the deposits until they reach the age of 65, so as to further cater for their retirement needs. Regarding Hong Kong¡¦s retirement protection system, will the Government inform this Council:

(a) whether it plans to follow the initiative of Macao and open a retirement protection account for each adult permanent resident of Hong Kong, as well as inject funds into these accounts when there is a fiscal surplus, to the effect that retirement protection will be available to all Hong Kong people; if so, of the details, if not, the reasons for that;

(b) given that members of the public have relayed to me that as the existing mandatory provident fund (MPF) system needs to rely on long-term accumulation of retirement savings and prudent investment of these savings by MPF trustees, it fails to provide instant and long-term assistance for low-income persons, full-time housewives, the unemployed and the elderly, whether the Government will further review the MPF system to strengthen its function of retirement protection and consider injecting funds into MPF accounts during years with fiscal surpluses, thus perfecting the MPF system and enhancing retirement protection for the public; if it will, of the details; if not, the reasons for that; and

(c) given that Hong Kong's population is ageing rapidly and the people's needs for a sound retirement protection system are growing, whether the Government plans to conduct further public consultation on the existing retirement protection system and make improvements to the system so as to more comprehensively cater for the retirement needs of the public; if so, of the details; if not, the reasons for that?


     Improving the quality of life of the elderly so as to provide them with a sense of security, a sense of belonging and a feeling of health and worthiness has always been the Government¡¦s policy objective.  The Mandatory Provident Fund Schemes Ordinance (the Ordinance) was passed by the legislature in 1995, and has taken effect since the end of 2000.  Together with the non-contributory social security system, including the Comprehensive Social Security Assistance Scheme, and the Social Security Allowance Scheme which comprises the Old Age Allowance and Disability Allowance, and voluntary private savings, Hong Kong has since adopted the three-pillar model for retirement protection.

     Of the three pillars, the social security system can target welfare resources to those most in need, including the elderly, to help them meet basic and special needs.  In fact, nearly 80% of elders aged 65 or above are at present receiving assistance or allowance of different types under the social security system.

     The Mandatory Provident Fund (MPF) System assists the employed population in accumulating retirement savings through contributions by both employers and employees, so as to enhance retirement protection for the employed population in Hong Kong.  As at the end of June 2009, more than 2 400 000 employees and self-employed persons as well as 230 000 employers were participating in MPF schemes, and the total value of assets accumulated under the MPF System exceeded $259 billion.

     The Government and the Mandatory Provident Fund Schemes Authority (MPFA) have been reviewing and optimising the arrangements in various areas under the existing system from time to time in the light of the experience gained from actual operation and the latest market development.  Altogether seven bills have been enacted by the Legislative Council (LegCo) so far to amend the MPF legislation so as to improve the operation of the system and better fulfil the objective of enhancing retirement protection for the employed population.  These include the legislative amendments made in 2008 to significantly raise the penalty for default contributions.

     As to whether the Government should inject funds into MPF accounts when having fiscal surplus, LegCo discussed the issue when it scrutinised the Mandatory Provident Fund Schemes (Amendment) Ordinance 2008 in July 2008.  At that time, we had already explained clearly that the Financial Secretary would formulate appropriate fiscal measures each year in the light of factors such as the financial position of the year, the needs of the citizens, social and economic developments, as well as the views of the community.  The flexibility of deploying resources by the Government and the Financial Secretary would be greatly hampered if there was a strict requirement for the Government to inject funds into MPF accounts during years with fiscal surplus.  We therefore consider this proposal not feasible.

     In fact, retirement protection systems in different places around the world are closely related to factors such as the local socio-economic environment, population structure and tax policy, as well as the development of the local financial market.  The systems adopted in other places may not be completely suitable for Hong Kong.  The three-pillar model for retirement protection being implemented in Hong Kong was adopted in the 1990¡¦s after lengthy discussion by different sectors of the community.  The Government is currently studying the sustainability of the three pillars, and we will consider the findings of the study and other pertinent factors before deciding on the future course of action.  The important factors to be considered will include safeguarding traditional family values, maintaining our overall economic competitiveness and simple tax system, and ensuring the sustainable development of the existing social security system, etc.

Ends/Wednesday, November 25, 2009
Issued at HKT 12:32


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