The Commission on Poverty today launched a six-month consultation on retirement protection, which includes two simulation options for public discussion.
Speaking at a press conference today, Chief Secretary and commission chairperson Carrie Lam said the "regardless of rich or poor" option would not require a means test, while the "those with financial needs" option would. Both simulations are based on a $3,230 monthly payment.
Using data from May this year, 1.12 million seniors will be eligible for the payment under the "regardless of rich or poor" option, while 250,000 seniors will be eligible under the "those with financial needs" approach.
The "regardless of rich or poor" option will increase Government expenditure by $22.6 billion in 2015 and $56.3 billion in 2064, around 10-times more than the "those with financial needs" option, which costs an extra $2.5 billion in 2015 and $6.0 billion in 2064.
The consultation document also outlined tax hikes or new taxes that may be needed to support the schemes, with the "regardless of rich or poor" option requiring a higher tax hike.
Regarding the long-term financial impact on Hong Kong, Mrs Lam said the "regardless of rich or poor" approach would advance the structural deficit by six years and exhaust the financial reserves eight years earlier, while the "those with financial needs" option will advance both by one year.
She noted that the Government has reservations about the "regardless of rich or poor" option, as it would undermine the long-term sustainability of public finances, reducing the Government's financial capacity to handle other retirement protection initiatives and compress expenditure on other policy areas.
Given the rapidly ageing population, any "regardless of rich or poor" options will, sooner or later run into deficit and will not be financially sustainable, adding a heavier tax burden on the younger generation.
Raising or introducing new taxes will also weaken the city's ability to attract foreign investment and undermine economic development, which would affect Hong Kong's competitiveness.
The consultation also reviews the Mandatory Provident Fund's "offsetting" arrangement, which the commission agreed would reduce employees' retirement savings. The commission noted that the issue's complexity should not be underestimated and that discussions should not resort to choosing between "keeping" or "abolishing" the arrangement.
Click here for the consultation paper.
