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The HKSAR Government today (August 20) released a study report on retirement protection conducted by a research team led by Professor Nelson Chow Wing-sun, Chair Professor at the University of Hong Kong. The Business and Professionals Alliance for Hong Kong (BPA) noted from the report that in addition to the current 5% contribution made to the Mandatory Provident Fund (MPF), it has been suggested that an old-age tax be introduced whereby employers and employees pay an extra 1-2.5% on their salaries. This would undoubtedly place further financial strain on small and medium enterprises (SMEs), as well as low to middle income families. It is also noteworthy that the research team had acknowledged in its report that the proposed universal pension scheme would begin to show a structural deficit in 2026 and that the balance would drop to HK$13.5 billion in 2041. The financial sustainability of such a scheme is therefore highly questionable.
Mr Andrew Leung Kwan-yuen, BPA Chairman, pointed out that if the thirty-something segment of the population were to pay the old-age tax as from today they would not be able to receive anything at all when they are eligible for pension at the age of 65 as the scheme would have already been depleted before then.
The BPA has always maintained that public funds and resources should be deployed prudently to help those in need. As such, the proposed non-means-tested universal pension scheme that does not differentiate between senior citizens that are rich and less well-off represents an ill-conceived and irresponsible approach.
In another study commissioned by the Financial Secretary and produced by the Working Group on Long-Term Fiscal Planning, it was projected that a structural fiscal deficit could occur in 2029 and it has been recommended that the government identify new sources of revenue. The BPA therefore urges the government to study Professor Chow’s report carefully and to be particularly mindful of the pressure that the proposed scheme could bring to our public finances. Please do not leave a time bomb for our next generation!