2017 Policy Address by Chief Executive (11)
185. Elderly persons have diverse retirement needs. Some have to rely on social security; others may only require some living allowances; the rest are self-sufficient. Hence, for retirement protection, there is no one-size-fits–all approach. A flat-rate payment by the Government to all elderly persons irrespective of financial means will only dilute the support available to those in need.
Reinforcing the Multi-pillar System
186. In 20 years, one-third of Hong Kong's population will be aged 65 or above. Moreover, with longer life expectancies, Hong Kong people's retirement life can be as long as 20 to 30 years. As such, the community needs to be well prepared for retirement protection. After consulting the public, we consider the existing multi-pillar retirement protection system should continue. At the same time, we should enhance the effectiveness of each pillar while maintaining the sustainability and financial viability of the system.
187. First, the pillar of the Mandatory Provident Fund (MPF) should be enhanced to maximise the protection for employees. Second, the pillar of social security should be strengthened to perform well the function of a safety net. Third, assistance should be rendered to the elderly to meet their medical expenses. Fourth, financial products should be developed to help the elderly make good use of their assets to increase the stability of their post-retirement investment income.
Enhancing the Mandatory Provident Fund System
188. The Government proposes to progressively abolish the "offsetting" of severance payments (SP) or long service payments (LSP) with MPF contributions. The proposal contains three key elements. First, the abolition will have no retrospective effect. In other words, employers' MPF contributions before the implementation date of the proposal will be "grandfathered".
189. Second, as some SP and LSP functions overlap with those of the MPF system, we propose that the amount of SP or LSP payable for an employment period from the implementation date be adjusted downwards from the existing entitlement of two- thirds of one month's wages to half a month's wages as compensation for each year of service. Third, the Government will share part of the expenses on SP or LSP of employers in the 10 years after the implementation date of the abolition to help employers, especially SMEs.
190. The above arrangement will only apply to employees covered by the Mandatory Provident Fund Schemes Ordinance or other statutory retirement schemes.
191. Apart from obtaining a certain sum as compensation upon dismissal, dismissed employees will have their MPF fully protected upon the implementation of the proposal. Although expenditure by employers will increase, the "grandfathering" arrangement and the government subsidy will help mitigate the impact.
192. Following the launch of the Default Investment Strategy in April this year to address the concerns of "high fees" and "difficulty in making investment choices", the next objective of the MPF Schemes Authority is to put in place an eMPF, a centralised electronic platform, to facilitate the standardisation, streamlining and automation of the MPF scheme administration, thereby further reducing costs and paving the way for "full portability" so employees will have full control over the investment strategy. This will promote market competition among trustees, and increase the prospect of fee reductions. The Government's vision is "one member, one account", so that each employee will pool all MPF accrued benefits into a single MPF account for more effective management of his/her retirement savings. The Government will render full support to these efforts.
Optimising the Multi-tiered Social Security Pillar
193. The OALA was implemented shortly after I assumed office. It now benefits more than 440 000 elderly persons, or around 37% of the elderly population. To strengthen the support of this social security pillar for elderly persons, the Government will enhance the OALA through two measures. First, we will add a higher tier of assistance by providing a higher monthly allowance of $3,435 per person, or about one-third higher than the existing rate, for elderly persons with more financial needs who are eligible for the allowance, i.e. elderly singletons with assets not exceeding $144,000 or elderly couples with assets not more than $218,000. Second, we will relax the asset limits for the existing allowance, from $225,000 (with effect from 1 February 2017) to $329,000 for elderly singletons and from $341,000 (with effect from 1 February 2017) to $499,000 for elderly couples, to benefit more elderly persons with financial needs. Around 500 000 elderly persons will benefit from the two measures in the first year, and the coverage of OALA will increase to 47%. Counting in the CSSA as well as the non-means-tested OAA and DA, the social security pillar will in the first year cover nearly 910 000 or 74% of elderly persons.
194. While maintaining the requirement that applicants under the CSSA Scheme must apply on a household basis, we will abolish the arrangement for the relatives concerned to make a declaration on whether they provide the elderly persons who apply for CSSA on their own (e.g. an elderly person who does not live with his/her children) with financial support (the so-called "bad son statement"). Only the elderly applicants will be required to submit information. Moreover, the eligible age for elderly CSSA will be raised from 60 to 65 to align with the direction of our population policy to extend retirement age. Elderly persons aged between 60 and 64 who are receiving CSSA before the new policy takes effect will not be affected.
Improving Healthcare for the Elderly
195. To alleviate the burden of medical expenses on elderly persons and their families and to enhance health promotion and primary care services, the Government proposes to lower the eligibility age for the Elderly Health Care Vouchers from 70 to 65, so that about 400 000 more elderly persons will receive $2,000 a year to purchase private primary care services. In addition, we will extend the fee waiver for public hospital and clinic services to cover the older OALA recipients with more financial needs, i.e. those aged 75 or above with assets not exceeding $144,000 for elderly singletons or $218,000 for elderly couples, benefiting 140 000 elderly persons. We will also provide free or subsidised 13-valent pneumococcal conjugate vaccine under the Government Vaccination Programme and the Vaccination Subsidy Scheme respectively.
196. We will increase the recurrent provision for the Hospital Authority (HA) by $2 billion annually from the next financial year onwards to continue to strengthen healthcare services for the elderly and other patients, such as chronic disease management, rehabilitation support and service enhancement by HA's Community Geriatric Assessment Teams for terminally ill patients living in residential care homes for the elderly.
Supporting the Elderly in Investment Management
197. The Government will study the feasibility of a public annuity scheme and explore whether we can have life annuity plans run by the public sector, so as to help elderly persons turn their one-off assets into a stable monthly retirement income to reduce uncertainty. The Government will also consider issuing larger volumes of Silver Bonds, which have been popular among the elderly, and setting a longer term. In addition, we will encourage the financial sector to develop more retirement-related investment products.
The Way Forward
198. This is the first systematic territory-wide discussion on retirement protection by the Government since our return to the Motherland. It is both pragmatic and resolute for the Government to put forward a series of measures to optimise the existing multi-pillar system, in particular the three pillars of social security, the MPF and public services, which involve an additional annual recurrent government expenditure of over $9 billion on average in the coming 10 years and one-off expenditure of $6 billion. Besides, as employers may need to make provisions for LSPs, the tax revenue of the Government may also be affected. It is difficult to precisely predict the actual impact at this stage, but tax revenue forgone in the coming 10 years may amount to $18 billion. When the Government no longer subsidises employers in the 11th year, it may forgo up to $2.6 billion in tax revenue per annum and such loss will continue. In the face of the challenges posed by an ageing population, these substantial public finance commitments not only demonstrate the determination and sincerity of the Government, but also take into account the affordability of the Government and employers, as well as maintain a balance between the interests of employers and employees.
199. On measures to enhance the OALA and healthcare services, the Government will implement them as soon as possible subject to funding approval by the LegCo. As for the proposal to abolish the "offsetting" arrangement, we will discuss in detail with the business and labour sectors, MPF trustees and relevant advisory bodies in the coming three months, and finalise our proposal by the end of June. We hope all parties can properly resolve this thorny problem in a spirit of mutual respect and understanding, and foster a constructive interaction between employers and employees in the future.
200. Subject to approval by the LegCo, the Statutory Minimum Wage (SMW) rate will be increased with effect from 1 May this year. This is the third time for the current-term Government to increase the SMW rate, which will benefit tens of thousands of low-income employees.
201. The Standard Working Hours Committee will submit its report to the Government by the end of this month before its term expires. The Government will take full account of the report of the Committee and the views of various sectors of the community, and strive to map out within the term of the current Government the working hours policy direction that suits Hong Kong's socio-economic situation.
202. Currently, there are over 350 000 foreign domestic helpers in Hong Kong, assisting over 280 000 households with housework and taking care of the elderly and children in their families. The Labour Department plans to introduce an amendment bill in the second quarter of this year to provide the legal basis for the newly promulgated Code of Practice for Employment Agencies, and to impose heavier penalties on employment agencies overcharging job seekers or operating without a licence so as to achieve a stronger deterrent effect.
203. The Labour and Welfare Bureau has commenced a consultancy study on the feasibility of drawing up a talent list to attract high-quality talent in a more effective manner to support Hong Kong's development as a high value-added and diversified economy. The study is expected to be completed this year. Besides, the Government will inject an additional $1.5 billion into the Continuing Education Fund to encourage the public to pursue continuing education.
(To be continued)
Ends/Wednesday, January 18, 2017
Issued at HKT 12:55
Issued at HKT 12:55
2017 Policy Address by Chief Executive (1) (with photos/video) 2017 Policy Address by Chief Executive (2) 2017 Policy Address by Chief Executive (3) 2017 Policy Address by Chief Executive (4) 2017 Policy Address by Chief Executive (5) 2017 Policy Address by Chief Executive (6) 2017 Policy Address by Chief Executive (7) 2017 Policy Address by Chief Executive (8) 2017 Policy Address by Chief Executive (9) 2017 Policy Address by Chief Executive (10) 2017 Policy Address by Chief Executive (12) 2017 Policy Address by Chief Executive (13) 2017 Policy Address by Chief Executive (14) 2017 Policy Address by Chief Executive (15)