Old Age Income Protection

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• Old Age Income Protection

Proposal on Universal Retirement Protection
Joint Alliance for Universal Retirement
Protection
July 2005
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Joint Universal for Universal Retirement
Protection(1)
Elderly / Elderly Concerned Groups Association
for the Rights of the Elderly (Chinese Grey
Power)?????? (Concern Alliance on the Interests
of the Elderly)????????? Hong Kong Association of
Gerontology The Hong Kong Association Of Senior
Citizens Hong Kong Christian Service Elderly
Council (Hong Kong Elderly Rights
League)???????? (The Salvation Army Elderly
Mutual Help Society)???????? Senior Citizen Home
Safety Association Women (Grassroot Women
Concern Poverty Group)????????? (Hong Kong
Association for the Survivors of Women Abuse
(Kwan Fook) )??????? Hong Kong Federation of
Womens Centres Hong Kong Federation of Women's
Centres - Retraining Alumni Association Hong Kong
Homemakers Alliance (Hong Kong Women's Coalition
on Equal Opportunities)???????? Hong Kong Women
Workers Association (New Arrival Women
League)??? Women Green Life Workers Cooperative
Society Limited Zi Teng
Labour (The Federation of Hong Kong and Kowloon
Labour Unions Rights Commission) (Global Network
- Grassroot Labour Alliance)?????? - ???????
Hong Kong Catholic Commission for Labour
Affairs Hong Kong Christian Industrial
Committee The Hong Kong Confederation of Trade
Unions (The Hong Kong Confederation of Trade
Unions Women Committee) (The Hong Kong Federation
of Trade Unions Social Policy Commission) Neighbou
rhood and Workers Service Centre Industrial
Relations Institute ????? Grassroots (Concerning
CSSA Review Alliance) (Grassroots Development
Centre)?????? Sham Shui Po Community Association
(Strive for Grassroot Life Alliance)????????? ???
??? ?????????
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Joint Universal for Universal Retirement
Protection(2)
People with Disability Association of Women with
Disabilities Hong Kong Direction Association for
the Handicapped Rehabilitation Alliance Hong
Kong Religions and Social Welfare Hong Kong
Christian Council ?????????? The Hong Kong
Council of Social Service Hong Kong Social
Security Society Hong Kong Social Workers
Association Hong Kong Social Workers General
Union (Hong Kong Policy Viewers)?????? Justice
and Peace Commission of the Hong Kong Catholic
Diocese Oxfam (Hong Kong) Society for Community
Organization Youth Hong Kong Federation of
Social Work Students YMCA of Hong Kong
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Aging Population
According to CSD, the percentage of aging
population (aged 65) will increase to 27 in
2033.
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Increasing trend of Elderly Poverty
Poverty rate of the elders rose to 32.6 in
2002. In others words, 326 out of 1000 elders
lived in low-income households.

• Note Elderly Poverty Rate defines as the
  proportion of people aged 65 and above who live
  in low-income households to the whole elderly
  population. Low-income households refer to those
  domestic households with monthly household income
  less than or equal to half of the median monthly
  domestic household income of the corresponding
  household size.

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Increasing caseload of CSSA Old Age cases
Old Age was the major case type of
Comprehensive Social Security Assistance (CSSA)
Scheme. The number of Old Age cases increased
from 61,026 in 1994 to 150,652 in April 2005.
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Limitations of MPF
Since 2000, MPF was adopted. However, it was
estimated that 69 of population (i.e. 4.03
millions of people) would live under basic
standard level after their retirement. These
population could only depends on CSSA so as to
sustain their livelihoods. The Government would
have financial pressure on increasing taxes in
the future.

• 30-40 years are needed to make MPF mature, which
  cannot protect the retired elders and soon-to-be
  old persons.
• Low replacement rate. It is estimated that the
  replacement rate would be 20-30 for 40-year
  contributory period.
• Not entitled for homemakers, unemployed persons,
  etc. That means economically inactive persons
  (i.e. 40 of adults) were not covered by MPF.

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Old Age Income Protection (OAIP) Scheme

• Do NOT need extra contribution.
• Provide retirement protection for all elderly
  people. The scheme is planned with 50-year
  projections on population structure and cash
  flow, which is sustainable to run through the
  peak of aging population.
• Release the Governments financial burden on CSSA
  Old Age cases, and also the pressure on
  increasing taxes in the future.

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Objectives

• Make all elderly people able to sustain their
  livelihood

• Eradicate elderly poverty

• Deal with the public financial burden arising
  from aging population.

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Eligibility criteria
To be eligible for Old Age Income, receipents
must be

• aged 65 and above and
• a Hong Kong resident for at least seven years.

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Prerequisites and Assumptions

• Population Projection on 2034-2053 is based on
  the same assumptions of the CSDs Hong Kong
  Population Projections 2004 2033.
• Projection on MPF contribution is based on
  current situation of labour participation rate.
• Average annual real payroll growth is 2.1.
• Average annual real investment return rate is
  2.1.

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Plan A2,500-dollar Plan

• As a monthly Old Age Income, 2,500 will be
  distributed to every eligible senior citizen,
  instead of CSSA standard rate and old age
  allowance.

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Governments Contribution

• Under the Comprehensive Social Security
  Assistance (CSSA) scheme, the expense on the part
  of standard rates for the receipents aged 65
  and
• Under the Social Security Assistance (SSA)
  scheme, the expenses on the part of Normal Old
  Age Allowance and Higher Old Age Allowance.
• It was estimated that the expenses on above
  items was 8 billions in 2003. In the following
  years, Governments contribution would be
  adjusted according to the annual growth rates of
  elderly population.

The expense excludes the parts of supplement
and special grants for the CSSA recipients aged
65 and above.
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Employers Contribution

• For each employee, employer is required to
  contribute 2.5 of relevant income.
• (Subject to the maximum levels of income, i.e.
  20,000 per month. No minimum levels of income.)
• Employers contribution on MPF scheme is
  allowed to reduce a half, i.e. to 2.5. Another
  half saved from MPF scheme will be pooled into
  the OAIP Scheme. In other words, employers have
  no extra contribution.

Employers contribution includes those
employers joined in MPF scheme and also MPF
exempted ORSO schemes.
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Employees Contribution

• For each employer, he/she is required to
  contribute 2.5 of relevant income.
• (Subject to the maximum and minimum levels of
  income, those are 20,000 and 5,000 per
  month respectively)
• Employees contribution on MPF scheme is
  allowed to reduce a half, i.e. to 2.5. Another
  half saved from MPF scheme will be pooled into
  the OAIP Scheme. In other words, employees have
  no extra contribution.

Employees contribution includes those
employees joined in MPF scheme and also MPF
exempted ORSO schemes.
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Contribution Ratios
Diagram 1 The amount of contribution by
government, employers and employees in Plan A
(2500-dollar plan)
Year
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Partial Reserve
Owning to 20-year window barrier from 2003 to
2028, total contributions will be higher than the
expenses on Old Age Income. It is estimated that
142.1 billion will be accumulated as Partial
Reserve. With higher proportion of aging
population, Partial Reserve will be utilized
starting from 2028.
Diagram 2 Partial Reserve (2003-2053, for each
five years)
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Projection on Plan A (2,500-dollar Plan)
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Plan B3,000-dollar Plan
Old Age Income will increase to 3,000 per
month, so as to make the elders living standard
more reasonable .
Partial Reserve
Profits Tax
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Profits Tax

• It is suggested that extra capital of Plan B will
  abstract from corporates, whose net profit every
  year is above 10 millions.
• 4.64 billion will be captured from the related
  corporates in 2003, i.e. an increase of 1.75 of
  profits tax.

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Contribution Ratios
Diagram3 The amount of contribution by
government, employers and employees, and profit
taxes in Plan B, 3000-dollar Plan (2003-2053,
for each five year)
HK (000, 00..)
Year
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Projections on Plan B (3,000-dollar plan)
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Effect on Elderly, Low-income and Non-working
people
Targets
Beneficial Result

• Elderly people

• To provide protection for elderly and elderly
  carers families.

• To provide protection for low-income or mid-aged
  workers.

• Low-income people

• Non- working people

• To provide protection for family carers or
  disables who lack of job opportunities

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Influence on Different Family(1)
Compare different retirement protection by
different people (after aged 70)
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Influence on Different Family(2)
?????????(70??)?????????????
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Alleviation of Government and Societys Burden

• The ratios of Comprehensive Social Security
  Assistance (CSSA) aging recipients to aging
  population will increased to 24.4 in 2031.
• Owing to above estimation, government will saved
  81.4 billion by launching Old Age Income Plan.
  In the single year 2031, 6.1 billion will be
  saved.
• The saved expenses is approximately 10 of
  income taxes imposed. In other words, if Old Age
  Income plan was not carried out, government
  relied on imposing tax to disburse the extra
  expenses of increasing aging population and the
  ratios of CSSA recipients, each labour population
  would pay ten more percentage salaries tax.

We use logistic model in predicting the
ratio of CSSA aging recipient under the condition
of any MPF plan, and then we use logarithmic
utility model in predicting how long the MPF
plan makes contribution to duration that elderly
postpone their CSSAs needs. Finally, we
calculate the estimated ratios of CSSA aging
recipient in future 30 years.
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Enhancement of local economy development

• Carrying out Old Age Income Plan, totally more
  than twenty billion dollars will be distributed
  to elderly immediately.
• Since most elderly consume locally and
  sustainably demand local services, the Old Age
  Income will function as stimulator of local
  economy, especially retailing industry, personal
  service industry and community economy demanded
  by grassroots elderly.

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Joint Alliance for Universal Retirement
Protection
Old Age Income Collectively Save Up, At hand,
with elderly, Hand UP Entire contributes
Retire Entire enjoys Retire