The Alliance for Universal Pension says it will hold a march later this month to call on the government to release the full report done by an academic on retirement protection methods.
Professor Nelson Chow, who was appointed by the government, has finished studying various pension scheme proposals and it will be made public soon.
But the Alliance said it was worried that the government will cover up controversial details in the report.
“March for universal pension“, The Standard, 4 July 2014.
Archive for the ‘Universal Transfers’ Category
[G]overnment-appointed consultant Nelson Chow Wing-sun said he will bat for a universal pension to give retirees a more stable income in his report to be submitted to the government today.
“If the community misses this chance [for a universal pension], it will be hard to raise it again in future,” said Chow, chair professor of the University of Hong Kong’s social work and social administration department.
He said income taxes could be increased or higher regular contributions than the Mandatory Provident Fund could be made, which could lead to strong opposition from some sectors. ….
He reiterated that the pension is not to “subsidize the poor, but to ensure the retired can have stable income regardless of whether they are wealthy or poor.”
Earlier, Chow said the pension should not be less than the existing old age living allowance of HK$2,285 a month and that if it is accepted, it would replace both the “old age allowance” – that is HK$1,180 a month and non-means tested, [thus universal] and covers those aged 70 and over – and the [higher] “old age living allowance” that is means-tested and open to those over the age of 65.
In an interview with Sing Tao Daily, Secretary for Labour and Welfare Matthew Cheung Kin-chung said he hoped to release the report to the public.
But he admitted that it is “too early to decide” on the injection of funds by the government and implementation of the pension because “the community’s consensus over the contribution to the pension matters the most.” ….
Lawmaker Fernando Cheung Chiu- hung said he supported Chow’s proposal of having an old age pension because it can relieve the poverty problem among elderly, while the fruit money alone does not help maintain their livelihood.
He said not many apply for Comprehensive Social Security Assistance as “some elderly are afraid of the labeling effect if they rely on CSSA.”
Alliance for Universal Pension organizer Au Yeung Kwun-tung said the alliance agreed largely with Chow’s proposal but would like to know if the government will conduct a public consultation, or will just give a summary of the report.
Hilary Wong, “Now or never for pension scheme“, The Standard, 30 June 2014.
[Nelson] Chow, a social work specialist from the University of Hong Kong, said the key issue was whether the chosen plan could be funded – either by the government, employer and employee contributions, or through higher taxes.
“In the end, the Hong Kong people will have to decide whether they are willing to pay. If people are unwilling to pay, let’s not discuss this any more – let’s not waste our time; I don’t want to do these studies any more,” he told TVB’s On the Record yesterday.
He said a retirement protection scheme was not about getting the wealthy to subsidise the poor. “I don’t want to make calculations this way, but if you really want to calculate it, I just want to tell those making over HK$30,000 [US$3,870] a month that what you pay would not be subsidising the poor,” Chow said.
“In fact, I want to make this clear: this scheme would be to ensure that Hongkongers have a stable income when they reach the retirement age, no matter whether they are rich or poor.”
He added that the middle and upper classes would benefit most from the proposed universal scheme, in which all Hongkongers would be eligible for a flat-rate monthly pension from the age of 65.
Chow previously suggested those with assets over HK$10 million and civil servants on big pensions should not be eligible for the universal plan.
Lo Wei, “Crunch time for new pension plan“, South China Morning Post, 30 June 2014.
It is still possible that Hong Kong’s older population might obtain access to reasonable universal pensions. A government-commissioned proposal will be submitted next month to the Legislative Council’s Commission on Poverty.
Everyone would be entitled to a flat-rate monthly pension from the age of 65 under an option being considered by an expert [University of Hong Kong Professor Nelson Chow Wing-sun] commissioned to lead a year-long government study of retirement proposals.
The proposed scheme … would replace the existing old-age allowance and old-age living allowance schemes.
Chow was commissioned … amid mounting public calls for a universal pension system. He is expected to finish his report next month and submit it to the Commission on Poverty.
The initial plan is for the non-means-tested scheme to provide a monthly amount adequate for a retiree to live “a reasonably acceptable life”. It is likely to be more than the [means-tested] HK$2,300 a month old-age living allowance. ….
Dr Billy Mak Sui-choi, of the Baptist University finance department, said the idea was politically feasible. “Basically, it is to scrap the old-age allowance and old-age living allowance schemes and pay the money under a new scheme. Financially, it does not mean a huge extra burden for the government.”
Ng Wai-tung, community organiser of the Society for Community Organisation, also hailed Chow’s proposal and suggested the monthly pension should be over HK$4,000.
Ng Kang-chung and Johnny Tam, “Plan for flat-rate monthly pension for all over-65s is proposed“, South China Morning Post, 27 May 2014.
The existing universal pension – known as ‘fruit money’ – is extremely low: HK$1,090 (US$140) a month). It is paid from age 70 to those who receive no other government assistance. For reference, the official poverty line is HK$3,600 (US$465) a month, the minimum wage is about HK$8,000 (US$1,032) a month, and per capita income is HK$295,701 (US$38,155) a year.
Those willing and able to pass a stringent means test are entitled, from age 65, to an Old Age Living Allowance (OALA) of HK$2300 (US$295) a month that is larger, but still far below the official poverty line.
Professor Nelson Chow last year proposed a universal pension of HK$4,000 (US$515) a month, which is above the poverty line, so would eliminate elder poverty in Hong Kong.
Since 1909 older Australians have enjoyed access to a noncontributory, basic pension known as the Age Pension. In 1992 a second Tier (Pillar), known as Superannuation Guarantee, was added. It consists of mandated contributions to privately managed retirement savings accounts. The contribution was set at 3% of wages in 1992, and has increased gradually over time. Currently (2014) it is set at 9.25%, and is scheduled to increase to 12% by the year 2019.
Australians still access the Age Pension, but must pass a means-test designed to reduce or eliminate benefits for the wealthiest 40% of the population. To reduce expenditure, the government would like to increase the age at which benefits begin. This idea is not very popular.
Two researchers from The Australia Institute (a Canberra-based think tank) have come up with a plausible alternative: Abolish the means-test for an Age Pension – transforming it into a universal pension – and increase its amount by 25%, but tax it as ordinary income. They run the numbers and find that all this can be financed by abolishing tax incentives for mandated contributions. The result is a more equitable pension system, fiscal savings in the short run, and revenue neutrality in the long run.
Here is an excerpt from the report’s summary:
As Australia’s population ages, government policies that assist retirement will become even more essential. Superannuation tax concessions and the age pension are the two key government policies that assist the ageing, but they are becoming increasingly expensive. Increasing costs have prompted the Treasurer, Mr Joe Hockey to suggest the pension age be increased to 70. This suggestion is part of an austerity narrative being used by the government to justify broader spending cuts to health, education and welfare support. This paper shows super tax concessions, most of which are being claimed by people able to afford early retirements if they choose, will soon cost more than the age pension.
The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14. These concessions are projected to rise to $50.7 billion in 2016-17, an increase of around 12 per cent per annum. By this time superannuation tax concessions will be the single largest area of government expenditure. The overwhelming majority of this assistance flows to high income earners. Low income earners receive virtually no benefit. The combined cost of these two policies will be $74 billion in 2014 alone. With an ageing population the dual pension/superannuation system will become increasingly expensive. The government’s own projections are that the cost of super tax concessions as a share of GDP will exceed that of the age pension by 2016-17.
This paper presents an alternative model that could produce a fairer, more adequate and more sustainable retirement system. It proposes that we abolish tax concessions for superannuation and create a universal (non-means-tested) age pension. This proposed system is similar to the approach taken in New Zealand where labour force participation among older people is higher than in Australia.
David Ingles and Richard Denniss, “Sustaining us all in retirement: The case for a universal age pension“, Policy Brief No. 60, The Australia Institute, April 2014.
The full report can be downloaded at the link above. The link below leads to a short synopsis.
A recent research paper released by the Australia Institute, says the Age Pension could be strengthened by tackling unfair and overly generous superannuation tax concessions.
The report titled, ‘Sustaining us all in retirement: The case for a universal age pension’, by David Ingles and Dr Richard Denniss, presents an alternative model which the authors say “could produce a fairer, more adequate and more sustainable retirement system”.
The authors say tax concessions for super are projected to rise to $50.7bn in 2016-17 and that the overwhelming majority of this assistance will flow to high income earners. The report suggests that if superannuation tax concessions are abolished, a universal and non-means-tested Age Pension could be created. “
Peter Wolfram, “Cuts to super concessions could strengthen Age Pension“, Commonwealth Bank News, 28 April 2014.
The current governor of the state of Chiapas is Manuel Velasco Coello, of the traditional Partido Revolucionario Institucional (PRI). He won 67.1% of the vote in the July 2012 election, in coalition with two small parties: the Ecological Green Party (PVEM) and the New Alliance Party (PANAL). During his campaign, Mr Velasco promised to continue the universal pension (Amanecer) begun in 2007 by governor Juan Sabines of the leftist PRD. A monthly pension of 550 pesos (42 US dollars) was given to all residents of the state 64 years of age and older, irrespective of wealth or income, from January of 2007 through December of 2012.
In 2013, the experiment of Chiapas with universal pensions came to an end. Shortly after taking office, in December 2012, the new governor announced that the Amanecer pension would continue, but with a change of rules. From now on, anyone receiving another pension – such as a contributory (social security) pension or the federal 65 y mas social pension – would not be eligible for the Amanecer pension. Many older persons had become accustomed to receiving two pensions – 550 pesos from the state, and another 500 pesos from the federal government – so were naturally upset when they were removed from the Amanecer roster. More than a thousand older residents of the state filed suits for reinstatement of rights to an Amanecer pension. Only one of these suits – that of an 88-year old woman from San Cristobal de las Casas – was successful. This was widely reported by the press on November 10th of last year.
The woman’s name is Micaela Sánchez Gómez. She is now 89 years old and is back in the news (more…)
Even the most advanced societies have taboos – untouchable areas of public life that only brave or foolhardy politicians go near. In America, social security and the right to bear arms are examples. In France, it is the labour laws. In Germany, it is the assertion of national interests abroad. In Britain, it is the NHS [National Health Service]. Any reform is interpreted by unions and voters as privatisation in drag. On the part of the unions, this is perfectly natural self-interest. But the public’s sensitivity lurks deeper in the soul and goes back to those years when a nation enervated and almost beggared by the second world war was moved to be “given” something for “free”. It is that searing folk memory that puts what passes for discourse about the NHS beyond the realm of reason.
The NHS is said to be the closest thing the British have to a national religion. If so, it must be led by a nonconformist, someone who believes in the core tenet of universal care but dissents from the surrounding theology of dirigisme. In Mr [Simon] Stevens, the government has found the most suitable of priests.
Janan Ganesh, “The data-driven technocrat out to break the NHS taboo“, Financial Times, 5 April 2014.
Simon Stevens (born 1966) was appointed chief executive of NHS England effective 1 April 2014. From 2000 to 2004 he was health policy adviser to Tony Blair and was closely associated with the former prime minister’s market-based plan to reform the NHS.
The Wikipedia entry for “National Pension (Japan)” reports that “in 1961 the National Pension Act created universal pension coverage for residents of Japan.”
The footnote leads me to a useful 53-page explanation of Japan’s complex system of old age pensions, from which I learn that every older resident receives a basic pension, to which an earnings-related pension can be added.
One of the characteristics of Japan’s public pensions is that the system of “universal pension coverage” is adopted in which all people are covered by public pensions regardless of occupation, income or other factors. Such a system was established by the start of the national pension plan in 1961. ….
Subsequently, the basic pension plan was introduced by a plan amendment in 1986.
Now, as a result, all working generations are insured by the national pension, and receive the benefits of a basic pension with a fixed amount according to their participation period when they become old. In addition, employees in the private sector, government employees or others participate in employees’ pensions (mutual aid pensions), and receive an earnings-related pension, as a topping-up of the basic pension, according to their earnings and participation period in the past.
Pension Bureau, The Point of the Pension Plan (Ministry of Health, Labour and Welfare, 1 June 2010), p.8.
If Japan’s basic pension is universal, why do residents receive “a basic pension with a fixed amount according to their participation period when they become old”? Browsing the brochure, I discovered that coverage is universal only in the sense that contributions are mandated. Everyone from the age of 20 to 60, including the unemployed and self-employed, must contribute the same sum each month. In 2010, mandated contributions were set at ¥15,100 (US$180) a month. On reaching age 65, those with 480 months (40 years) of contributions become eligible for a full basic pension, equal – as of 2009 – to ¥66,008 (US$724) a month. Older residents with additional, or fewer, contributions receive a proportionately larger, or smaller, basic pension. Those with fewer than 25 full years of contributions are entitled to a lump sum payment based on the number of contributions, but no pension.
This is a flat contribution/flat benefit pension system. It is universal only in the sense that the same rules apply to everyone: with fewer contributions, the pension in smaller. With no, or too few, contributions, there is no pension.
But, if everyone is forced to contribute, isn’t this a universal scheme, at least in coverage? Perhaps. But what about those who live in poverty, and cannot afford to make the mandated contributions, or at least not enough contributions to qualify for a pension? Those with low incomes do qualify for means-tested exemptions of up to 100% of the required contribution. But, the exempted contributions count for only a portion of a fully-paid contribution: 1/2 in the case of 100% exemption, 5/8 for 75% exemption, 3/4 for 50% exemption and 7/8 for 25% exemption. Someone who is lifetime poor could end up with fewer than 25 years of contribution credits, with no entitlement to a pension. Or, more likely, the pension would be equal to something like 2/3 of a full basic pension, or US$480, well below any reasonable poverty line in Japan.
In brief, Japanese basic pensions do not provide universal coverage, because the poorest find it difficult to accumulate enough credits to qualify for a basic pension. Of those who do qualify, the reduction in the size of the pension for those with too short a record of contributions leaves msny in severe poverty.
My conclusion: Japan’s pension system is complex and inefficient. The country should consider funding a basic pension from general government revenue instead of mandated ‘contributions’. (These hidden head taxes could be replaced by normal, fairer taxes on income and consumption). And, the basic pension should be made universal – with tests only of age and residence. Earnings-related pensions and personal savings can top-up the flat, basic pension available to everyone from age 65.
Economist Tyler Cowen of George Mason University (Virginia, USA) has written an excellent critique of the Paul Ryan report on poverty in the United States. (more…)
In November 2003 Dr Kurt Madörin, a retired Swiss aid worker, used part of his pension to initiate an old age pension scheme in a remote part of Tanzania. He named his experiment Kwa Wazee (“for the elderly”). With help from European donors, Kwa Wazee now reaches 1,100 persons aged 65 and older in six wards of Muleba District in North-western Tanzania. Selected older person receive 12,000 TZS (7.50 USD) in cash each month, with a supplement of 7,000 TZS (4.30 USD) per child for those caring for orphaned grandchildren. Older couples apparently have to share a single pension.
The Kwa Wazee pension is equivalent to 13% of Tanzania’s per capita GDP, lower even than the official poverty line (about 20,000 TSZ per person per month). This modest sum is nonetheless a godsend for older persons living in poverty. (more…)
The always helpful “International Update” of the US Social Security Administration this month contains a summary of the 2013 tri-annual report of New Zealand’s Commission for Financial Literacy and Retirement Income. The report covers numerous topics, including a review of KiwiSaver — the voluntary, government-subsidized retirement savings scheme (introduced in 2007) to supplement New Zealand Superannuation, a flat-rate universal pension funded by general government revenue. (more…)