The push for a pension
With the start of a new government, social groups are renewing calls for a universal pension. Shirley Zhao asks whether there could ever be a state handout for the elderly in Hong Kong
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 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 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 monthly allowance from the government and another $500 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 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.
“The last government didn’t do anything to help the elderly,” says Chung. “I’m totally disappointed. The new government should start a universal pension now so millions of us senior citizens can get the money earlier. If the new government doesn’t do it, it’ll be irresponsible.”
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.”
According to the Hong Kong Council of Social Service, about 1.26million people in the city – almost 18 percent of the population – are living in poverty while more than 33 percent aged 65 or over – one in three – are impoverished. The government population forecast shows that by 2039, the elderly population is expected to grow 165 percent to 2.5m, while the population aged 15 to 64 should rise by only three percent to 5.47m.
“The elderly people are in a dire situation at the moment and elderly poverty will become more serious with the ageing population,” says Mariana Chan Wai-yung, chief officer of HKCSS’s Social Security and Employment team. “And the current pension system has proved inefficient and not sustainable.”
Elderly people in the SAR can be financially supported by the government in three ways currently: Social Security Allowance, which includes an old-age allowance (‘fruit money’) and a disability allowance, the CSSA and the Mandatory Provident Fund. It’s nearly all means-tested and far from universal.
CSSA is applicable to households which pass asset and income tests – and the monthly amounts 2012range from $1,500 to $5,000 per person depending on age, health and number of family members. Fruit money is given to those who do not receive CSSA and requires those aged between 65 and 69 to pass income and asset tests. For those over 70, no means testing is required. The amount is $1,090 per person per month. The MPF system started in 2000. Employers and employees must each contribute five percent of the worker’s monthly salary to a registered MPF scheme for investment. The accumulated benefits are only retrievable when they reach the retirement age of 65.
But these three ‘pillars’ fall short when it comes to supporting the elderly, according to Chan. “The means tests required by the CSSA are very strict and are on a household basis,” she says. “Many elderly people live with their children – but, in today’s economy, their children may not be able to support themselves as well as their parents.” In such cases, explains Chan, if the elderly want to apply for CSSA, they have to either move out and live alone (so a new household is formed) or have their children sign an agreement – the so-called ‘bad-son paper’ – stating they are unable or unwilling to raise their parents. “The CSSA also has a labelling effect that makes elderly people feel ashamed or undignified,” adds Chan. “So, for many who qualify for CSSA, they won’t apply because of the negative implications.”
According to research conducted by Oxfam Hong Kong in 2010, there were more than 160,000 elderly people who qualified for CSSA but did not apply. Chan also thinks the old age allowance is too low. “It’s complementary at best,” she says, and she also labels the MPF system ‘a failure’ because it requires high management fees while yielding low return. “And for those who had already retired before or a few years after 2000 [when the system started], what can they get?” asks Chan. Meanwhile, those who are unemployed – especially housewives – are not covered by the system. “While it remains a debate if we should completely replace the MPF system with universal pensions, we’re afraid that MPF alone is not enough to support people in retirement,” says Au Yeung. “We need a universal pension as soon as possible.”
In some countries where a universal pension is in place, the system has become a headache for governments. In the UK, the elderly receive a state pension funded by National Insurance contributions and general taxation. Yet, with a rapidly ageing population, there’s little extra money coming in to maintain the scheme while more people are looking to claim pensions all the time. The British government must either increase taxes or use other cash pots (where are they?) to keep the system going. The problem is why many economists oppose a universal pension here.
Despite concerns, though, the alliance proposes a different contributory scheme which it believes is sustainable for at least 50 years. The 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 into a pool, where the money would be saved and added to, racking up interest instead of being used for investment. 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. If the government adopted this system and started it in 2014, by the end of 2023 the surplus together with the ‘seed money’ would amount to HK$92.17b, says the alliance, and the accumulated deficit from 2024 to 2039 would be HK$89.97b. “This is why the scheme needs to be started as soon as possible – or the government will have to inject more seed money to cover the deficit,” says Au Yeung.
“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 when the ageing of the population is not so fast, so when the elderly population reaches a peak, there will be ample savings to support it.”
Sitting on a financial reserve of HK$600b, the government seems capable of paying for the seed money as well as an annual contribution too. Yet there are also doubts about the plan. “Can elderly people really survive on $3,000 a month?” asks Nelson Chow Wing-sun, professor at the University of Hong Kong’s Department of Social Work and Social Administration. “Currently, an elderly person can receive around $3,700 [including government-subsidised rent] from CSSA, plus fruit money. That makes almost $5,000 a month. If a universal pension is to replace the current system, those who really need financial support will get less, while those who don’t need any support can also have $3,000 every month. Is it really fair?”
Cheuk Yu-shan, a member of think tank Lion Rock Institute, questions the practicality of claiming tax from private businesses. “It sounds ideal,” he says, “but it seems to forget that corporations can set up spin-off companies to evade the tax.”
Even the alliance itself raises some questions – can elderly people who have resettled on the Mainland or overseas enjoy the benefits? Should there be additional conditions for them? “These can all be discussed,” says Au Yeung. “But the first thing the government needs to do is put out a universal pension proposal, be it ours or a combination of proposals from different parties, for public consultation, so it can be discussed.”
In his first question-and-answer session at the Legislative Council, Chief Executive Leung Chun-ying laid out his plan to double the fruit money and make the allowance means-tested. Au Yeung says he welcomes the plan as a 'transition to the universal pension'. "This plan can help solve the urgent need of the impoverished elderly," he says. "But this should not be all. The government should also work on a universal pension plan and take it to the public. If it doesn't have a public consultation on this, how can we know what Hong Kong people really think about a universal pension?”