Gold For Silver

Mr President, Honourable Members, and fellow citizens. This is the third policy address of my current term. The first in 2013 touched on many subjects but its main theme was tackling the housing situation. The second in 2014 again covered a variety of issues but had as its central narrative measures to alleviate poverty.

This year I would like to focus on support for the elderly.

We need first to get our thinking straight on the matter of an appropriate retirement age. With average life expectancy at 80 for men and even higher for women, it was absurd for us to be proceeding on the basis that people would cease work at 60. Hence my decision announced last summer that the retirement age for the civil service would be raised progressively and quickly to 65. I hope all private sector employers have taken note and will consider taking similar action. Longer term we could even consider scrapping the idea of a retirement age altogether for those still interested in and capable of continuing to be gainfully employed.

Work is a noble and natural endeavour. There is nothing at all demeaning in still being economically productive and useful. What to do when those years are over?

I have issued instructions for the necessary steps to be taken to establish a new statutory body to be known as the Pensions Authority. This organisation will, from 1 January 2016, pay to each permanent resident of Hong Kong from his or her 70th birthday onwards an un-means-tested pension of not less than $6,000 per month.

The amount will be reviewed from time to time in the light of prevailing circumstances. In due course we will consider extending payments to those of our citizens who have chosen to retire in southern China.

To be clear, I expect most people who can to work until they are 65. For the following five years they should rely on their own savings and/or family support, bolstered if necessary by fruit money.

The new statutory pension will kick in when they reach the proverbial three score years and 10. Unlike the MPF, it will not be linked to their individual contributions.

How will the new authority be funded? It will begin life with a contribution of $100 billion from the government’s $1.5 trillion in fiscal reserves. We saved up this money for when it was needed. In my judgement the elderly need and deserve it now.

But the Pensions Authority also needs recurrent income. A back of the envelope calculation shows that to balance its books it needs a contribution of approximately $1,000 per month in respect of each adult resident between the ages of 18 and 65. Obviously that rough estimate should be fine-tuned.

For those already working, the solution is simple. The necessary sum will be deducted from the contributions currently being made by them, or for them, to the MPF.

We will also cast the net wider to bring in other categories not necessarily subject to the full rigour of the MPF, for example employees who are paid large sums in commission but infrequently. We will also bring in economically significant parties such as company directors and expatriates’ spouses. All employers will be responsible for making these payments in respect of persons they choose to base in Hong Kong, and that includes employers of domestic helpers.

Despite our best efforts there will be some – students, the unemployed, non-working spouses – in respect of whom we cannot find another party to pay the monthly sum. The government will make the contribution in respect of them from general revenue.

This will represent a permanent increase in our recurrent expenditure, but one we can afford. Moreover, there will also be intangible benefits such as an improvement in dignity: some recipients of the new pension will be getting the money instead of receiving CSSA. The procedures the elderly need to go through to secure CSSA are demeaning. No more. Respect for the elderly must be more than mere words.

To sum up, the new pension will be built around the basic principle of universality. Everyone pays in equally, everyone draws out equally.

Once we have fine-tuned the administrative arrangements and the Pensions Authority operations have bedded down, we will consider constructing on the same basis an equivalent body to provide universal health insurance.

Separately we will conduct a root and branch review of the MPF. All options will be on the table, including simple abolition.

I look forward to the full support from the community as we move into the new era of a proper universal pension.