CE announces plans in 2017 Policy Address to enhance retirement protection system
The Chief Executive, Mr C Y Leung, has today (January 18) announced plans in his 2017 Policy Address to enhance the multi-pillar retirement protection system.
He said firstly the pillar of the Mandatory Provident Fund (MPF) should be enhanced to maximise protection for employees; secondly, social security should be strengthened to perform well the function of a safety net; thirdly, the elderly should receive assistance to meet their medical expenses; and, lastly, financial products should be developed to help the elderly make good use of assets to increase the stability of their post-retirement investment income.
The Chief Executive proposed to progressively abolish the "offsetting" of severance payments (SP) or long service payments (LSP) with MPF contributions.
The move has no retrospective effect and employers' MPF contributions before the implementation date of the proposal would be "grandfathered".
To address the overlapping of some SP and LSP functions with those of the MPF system, the Government proposed that the amount of SP or LSP payable for an employment period from the implementation date be adjusted downwards from the existing entitlement of two-thirds of a month's wages to half a month's wages for each year of service.
The Government would help employers, especially small and medium enterprises, by sharing part of the employers' expenses on SP or LSP in the 10 years after implementation of the new arrangements. "Apart from obtaining a certain sum as compensation upon dismissal, dismissed employees will have their MPF fully protected upon implementation of the proposal," Mr Leung said.
"Although expenditure by employers will increase, the 'grandfathering' arrangement and the government subsidy will help mitigate the impact."
Mr Leung said the next objective of the MPF Schemes Authority would be to launch a centralised electronic platform - eMPF - to standardise, streamline and automate MPF administration, which would reduce costs and pave the way for "full portability".
"This will promote market competition among trustees and increase the prospect of fee reductions. The Government's vision is 'one member, one account', so that each employee will pool all MPF accrued benefits into a single MPF account for more effective management of his/her retirement savings."
On social security, Mr Leung said the Old Age Living Allowance (OALA) - currently benefiting 440,000 people, or 37 per cent of the elderly population - would be enhanced with two measures:
* Add a higher tier of assistance by increasing the monthly allowance by about one-third to $3,435 per person for those elderly people with more financial needs, that is, elderly singletons with assets not exceeding $144,000 or couples with assets not exceeding $218,000; and
* Relax the asset limits for the existing allowance from $225,000 (with effect from February 1) to $329,000 for singletons and from $341,000 to $499,000 for couples to benefit more elderly people with financial needs.
The two measures would benefit around 500,000 elderly people in the first year and take OALA coverage to 47 per cent.
To align with the direction of population policy to extend the retirement age, the eligible age to receive Comprehensive Social Security Assistance would be raised from 60 to 65. Those aged between 60 and 64 receiving the allowance before the new policy takes effect will not be affected.
To alleviate the burden of medical expenses on elderly people and their families, the age limit for the Elderly Health Care Vouchers would be lowered from 70 to 65, providing about 400,000 more elderly people with the annual $2,000 voucher to purchase private primary care services.
To cover the older OALA recipients with more financial needs, public hospital and clinic service fees would also be waived for those aged 75 or above with assets not exceeding $144,000 for singletons and $218,000 for couples, benefiting 140,000 elderly people.
To help the elderly with investment management, the Government will explore the feasibility of a public annuity scheme that would allow elderly people to turn one-off assets into stable monthly retirement income. The Government will also consider issuing more and longer-term Silver Bonds.
Mr Leung said, "This is the first systematic territory-wide discussion of retirement protection by the Government since our return to the Motherland."
He estimated that the Government's measures to optimise the three pillars of social security, the MPF and public services would involve an extra $9 billion annually in recurrent government expenditure in the next decade and $6 billion in one-off spending.
As employers may need to make provisions for LSPs, the tax revenue forgone by the Government in the coming 10 years may amount to $18 billion.
"In the face of the challenges posed by an ageing population, these substantial public finance commitments not only demonstrate the determination and sincerity of the Government, but also take into account the affordability of the Government and employers, as well as maintain a balance between the interests of employers and employees," he said.
Mr Leung also unveiled plans to enhance elderly services, including:
* An additional 2,000 vouchers (on top of the current 3,000) under the Pilot Scheme on Community Care Service Voucher for the Elderly to support ageing in place for elderly people with moderate or severe impairment;
* Increase subsidised residential care places and issue 3,000 service vouchers under the Pilot Scheme on Residential Care Service Voucher for the Elderly from 2017 to 2019;
* Increase funding for the Infirmary Care Supplement and the Dementia Supplement; and
* Extend the Pilot Residential Care Services Scheme in Guangdong for three years and introduce a Fujian Scheme to provide monthly Old Age Allowance for eligible persons who choose to live in Fujian.
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