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LCQ1: Retirement Protection

     Following is a question by the Hon Lee Cheuk-yan and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (January 12):

Question :

     At the meeting of the Panel on Welfare Services of the Legislative Council held on December 18, 2010, the Government indicated that "the Central Policy Unit (CPU) is studying the sustainability of the existing retirement protection model". However, according to records, an expert panel had been formed under CPU as early as in July 2004 to conduct studies on the subject, and CPU had received the preliminary findings of the studies in 2007 and 2008. In this connection, will the Government inform this Council:

(a) of the details of the aforesaid preliminary findings of the studies;

(b) why it has not published the aforesaid preliminary findings of the studies; and

(c) given that the aforesaid studies have been conducted for more than six years, when the authorities expect the studies will be completed?



     The Administration attaches great importance to the welfare of retired elders. Improving the quality of life of the elderly to provide them with a sense of security, a sense of belonging and a feeling of health and worthiness has always been our policy objective. In line with this objective, Hong Kong has been adopting a three-pillar model for retirement protection, that is, the non-contributory social security system (comprising Comprehensive Social Security Assistance, Old Age Allowance (OAA) and Disability Allowance), the Mandatory Provident Fund (MPF) system which was introduced ten years ago after careful and extensive discussion in the community, and voluntary private savings.

     The current model is well established and has been performing its due function. Nonetheless, the Administration has been monitoring closely the operation of the model in the light of Hong Kong's changing socio-economic circumstances and will introduce changes as appropriate and necessary. A recent example is the increase in the level of OAA to $1,000 with effect from January 2009. As regards the MPF system, the Mandatory Provident Fund Schemes Authority will continue to review and improve its operation, including the review of the minimum and maximum income levels for MPF contributions and the restrictions on withdrawal of MPF accrued benefits.

     My reply to the Hon Lee Cheuk-yan's question is set out below:

     The Central Policy Unit (CPU) has been conducting studies on issues of public concern for reference by the Administration in formulating policies. CPU has also looked into the subject of retirement protection, and completed five related studies between 2007 and 2010.

     Overall speaking, the three pillars under the current retirement protection model in Hong Kong are complementary to one another, and would continue to be so in future.

     Some of the findings of the CPU's studies were presented at the Conference on "Strengthening Hong Kong's Families: Obligation and Care Across the Generations" co-organised by CPU, The University of Hong Kong, The Chinese University of Hong Kong, City University of Hong Kong and the Family Council in June 2010. Some have also been made available on CPU's website.

     One of the main reasons why CPU has not yet released other study findings is that some data require updating in the light of changes in the social and economic environments as well as the latest developments in relevant policies. They also require further examination and analysis. For example, the studies included a territory-wide household survey. The data from this survey were used for setting up a micro-simulation model to project the income, expenses, savings, assets, etc. of elderly persons in 30 years' time. The size of the sample in the survey (about 5,000) was a rather big one, hence the longer time taken for the work. Upon completion of the simulation exercise, the financial tsunami occurred; and the monthly rates of OAA also increased to $1,000 shortly afterwards. These events have affected the assumptions and parameters of the original micro-simulation model, and have very likely compromised the accuracy of the projections.

     Meanwhile, there are also other new developments in relevant policies, e.g. the review of and improvements to the operation of the MPF system; the society is engaged in an active discussion of the proposed Health Protection Scheme; from next month (February) onwards, the permissible limit of absence from Hong Kong for OAA will be relaxed; and the statutory minimum wage will commence operation in May, etc. These developments will, to a certain extent, affect the retirement protection regime in Hong Kong.

     CPU considers it necessary to refine its study on the sustainability of the three-pillar model of retirement protection in Hong Kong, having regard to the latest developments, for more accurate projections and assessment. This will entail conducting a new territory-wide household survey to obtain data for making a new round of projections on the situation of retirees in 30 years' time. In the course of refining the study, CPU will consult the relevant bureaux, make reference to opinion in the community, and tap the views of academics, professionals, think tanks and interested parties as appropriate through its established channels.

     In deciding on any future course of action, the Administration will consider the findings of the CPU studies and other pertinent factors such as how to ensure the sustainable development of the social security system, safeguard traditional family values, and maintain our overall economic competitiveness as well as a simple tax system.

Ends/Wednesday, January 12, 2011
Issued at HKT 14:10


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