MR CHAN KIN-POR (in Cantonese): Deputy President, the Government’s plan to introduce tax concessions for Mandatory Provident Fund voluntary contributions (“MPF VCs”) and premiums for deferred annuity policies aims to encourage members of the public to make savings as a financial arrangement for their retirement in future. At present, the grassroots elderly are entitled to both the Old Age Living Allowance and Comprehensive Social Security Assistance, whereas the elderly of the middle-class cannot enjoy the protection by social security since they have certain assets and are financially capable. Therefore, they can only live on MPF and their personal savings after retirement. Those middle-class people who do not have proper retirement planning will inevitably fret about their post-retirement life.
I have been advocating over the past that the Government should adopt the insurance scheme model which has been prevalent in foreign countries for a long time to address our problems arising from an ageing society. It is particularly necessary to cater for the needs of the post-retirement life of those middle-class people who were subject to heavy tax payments but entitled to few welfare benefits. Relevant measures should include the voluntary health insurance scheme which is about to be rolled and the deferred annuity scheme right under our scrutiny, as well as the MPF VC scheme. All that the Government has to do is to provide limited financial incentives to encourage those people who are financially more capable to save up for the rainy days, thereby minimizing the burden on public resources from the middle-class in future. I consider this a win-win option that can help the middle-class while resolving social problems. On the other hand, this will help take forward the development of the deferred annuity market and make up for the inadequacies of the public annuity plan.Regarding the currently proposed tax concessions to be granted in the form of tax deduction, the Government has been dealing with the implementation details in a rather rigorous manner. I agree with the Government’s move since it is a must to safeguard the consumers’ interests and prevent abuse of public funds at the same time. For example, the Bill provides that the internal rate of return must be disclosed and the guaranteed annuity rate must not be less than 50%, thereby enhancing the transparency of the deferred annuity scheme to facilitate the making of appropriate choices by members of the public. This will also help enhance the regulatory efficacy of the legislation.
Moreover, the Government has taken Members’ advice as appropriate. The originally proposed amount of deduction at $36,000 could make possible a saving of only $5,000 or $6,000, which do not seem quite attractive to the middle-class. Members in the industry are worried that it may fail to give people the incentive to join the scheme, thus defeating the original purpose. In light of this, some Members advised the Government to increase the tax deductible amount to $100,000. After discussion, the Government finally agreed to increase the amount concerned to $60,000 instead and up to $100,000 can be saved. With the amount revised, the scheme will be much more attractive. Increasing the tax deductible amount will not only attract more people to join the scheme but also help take forward the development of the deferred annuity market. Of course, we also hope the Government will increase the amount of tax deduction with reference to the changes in and development of the market to maintain the competitiveness of deferred annuity products.
On product design, the industry expects the authorities to ensure flexibility in such products in addition to safeguarding consumers’ rights and interests so as to tie in with the future development of the market. It is also opined that the Government should put in place a mechanism that allows members of the public to make one-off contribution to the schemes concerned. As the amount of tax deduction currently proposed is calculated on a yearly basis, those making one-off contributions will not benefit from such tax concessions. In fact, there will really be some people who choose to make one-off contributions for some reasons. For example, they may have been given bonuses or cash awards which they would like to spend on taking out insurance policies. However, if contributions are to be made on a yearly basis, they may wonder how they should deal with the unused portion of the bonuses or cash awards received since the interest rates offered by banks for savings are rather low. Hence, they would rather make one-off contributions. Having regard that making one-off contributions enables one to have bigger return on investment, I hope the Government will also take into account the needs of those who opt to do so when it conducts reviews in future to offer them relevant tax concessions in the form of tax deduction. For example they can be allowed to break down the gross amount of one-off contribution for making declaration in their tax returns on a yearly basis.
Deputy President, I support the Bill.