A third of Hong Kong’s elderly residents live in poverty. Increasing numbers of Hongkongers – old and young alike – find this unacceptable. A new government has taken office in Hong Kong, and social groups are renewing calls for a universal pension. Shirley Zhao explains what is going on, beginning with the not-untypical story of a 71-year-old man.
Chung Hou-ping lost his cleaning job after suffering a stroke in 2009. The 71-year-old Hongkonger found walking almost impossible so getting another job was out of the question. Instead, he applied for Comprehensive Social Security Assistance [CSSA] a year later just so he could raise cash in order to live. His two sons signed a statement – as required by the government – saying they were unable to support their father. But Chung was turned down because he had a wife who was employed and earned around $9,000 [US$1160] a month. She could support him. In reality, though, it wasn’t that simple.
“My relationship with my wife was very bad at that time,” Chung tells us. “When I could still work, I could contribute to my family, so I got food. But after I lost my job they wouldn’t even cook for me. My wife wouldn’t allow it. And I was too old to consider a divorce.” So Chung faced starvation. He had no job, no money, no supporting family and a struggle for survival on the horizon. There was little help out there for him – but there could have been if there was a universal pension.
Chung has since managed to find pockets of cash, now surviving on $1,890 a month, including a $1,390 [US$180] monthly allowance from the government and another $500 [US$64] from his eldest son. But that’s it. “It’s hardly enough,” he says. “Now, every day, I buy a lunchbox in the daytime and have instant noodles for dinner. That’s all I can afford.”
Research released this month by the Alliance for Universal Pension [AUP] shows that more people are calling for a universal pension – almost 90 percent of 1,032 respondents, which is 4.5 percent higher than last year. The research also shows that 76 percent of affluent people also share the same opinion. ….
Au Yeung Kwun-tung, AUP’s organiser, says the last government used lack of consensus as an excuse not to put a universal pension scheme out for public consultation. “But our research shows the contrary,” he says. “There is a consensus in society that we need a universal pension – or a system without means testing.”
Shirley Zhao, “The push for a pension“, Big Smog Blog, Time Out Hong Kong, 17 July 2012.
Mr Chung is fortunate that he is now eligible for the universal old age allowance (“fruit money”) of HK$1090 a month, plus an additional allowance of HK$300 (most likely a transport allowance). Before his 70th birthday, he would have been subjected to a means test even for this small benefit.
Hong Kong’s social security benefits for the elderly consist of the HK$1090 age allowance (means-tested from age 65-69, universal from age 70) and an alternative, Comprehensive Social Security Assistance (CSSA), available from 60 years of age for those able to pass strict tests of income and assets. CSSA monthly benefits range from HK$2660 (able-bodied/50% disabled family member) to HK$3415 (single person, 100% disabled), to HK$4810 (single person, requiring constant care, not given in a government-owned or subsidized institution).
The government of Hong Kong finances all social security expenditures from general revenue. It has never pre-funded benefits, nor has it financed any part of social security from payroll taxes. Remarkably, given this history, the Alliance for Universal Pension [AUP] calls for partial pre-funding, for “a different contributory scheme which it believes is sustainable for at least 50 years”.
The [AUP] scheme, where every citizen aged 65 and older can receive $3,000 a month, includes three contributors – employers, employees and the government. Basically workers and businesses would put half of their five percent MPF contributions [mandatory retirement savings] into a pool …. Private businesses with an annual taxable profit of more than HK$10m would be charged an additional 1.9 percent. And, at the same time, the government would inject its CSSA expenditure for the elderly population and its old age allowance cash into the pool, also adding one-off ‘seed money’ of HK$50billion. ….
“The benefit of this scheme is that it’s not a Western-style ‘pay as you go’ system,” says Wong Hung, associate professor at the Chinese University of Hong Kong’s Department of Social Work. “It’s a partially pre-funded system participated by multiple parties ….
I agree that Hong Kong needs a meaningful universal pension, but see no need for prefunding. Moreover, the idea of funding it partially with a payroll tax in my opinion is a very bad idea. Workers who contribute 10% of their salaries to Mandatory Provident Fund accounts will not be pleased to see half of their savings go to Hong Kong’s treasury, and will understand that their government-mandated 10% savings plan has become a ’5% savings plus 5% payroll tax’ plan.
Ms Zhao’s otherwise excellent article contains one flaw: it contains an uncritical report of the views of Nelson Chow Wing-sun, professor at the University of Hong Kong’s Department of Social Work. Professor Chow is concerned that those who currently receive “almost $5,000 a month” from CSSA will be worse off when a HK$3000 universal pension replaces the current system. “Is it really fair?” asks Professor Chow. Well, consider the fact that to receive more than HK$3000 a month in CSSA benefits, you must be 100% disabled. Governments everywhere provide supplements for pensioners who are disabled. Nothing prevents Hong Kong from continuing to do the same. The government might also consider removing, for these supplements, the test of family income and assets.
There may be good reasons to push for a universal pension of HK$5000 rather than HK$3000, but the fact that some portion of pensioners are severely disabled is not one of them.