Report of the Delegation of the Subcommittee on Poverty to Study the Experience of Poverty Alleviation in Taiwan and Japan (2014.06.18)

MR CHAN KIN-POR (in Cantonese): President, we can draw lessons from a number of points in the report on the duty visit …

MR ALBERT CHAN (in Cantonese): President, we should not let Members enjoy their meals leisurely. I request a headcount.

PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(After the summoning bell had been rung, a number of Members returned to the Chamber)

PRESIDENT (in Cantonese): Mr CHAN Kin-por, please continue.

MR CHAN KIN-POR (in Cantonese): President, we can draw lessons from a number of points in the report on the duty visit. As many Members have already expounded in this respect, I wish to concentrate on the National Pension Scheme (NPS) of Japan.

According to the report, the NPS is a universal pension scheme aiming at providing basic retirement protection for all Japanese residents reaching the age of 65. All residents aged above 20 have to pay premium. Old-age basic pension is paid out to the insured after they have reached 65 years old and have paid premium for at least 25 years. The amount of pension payment depends on the number of years of premium contribution. Full old-age basic pension of about HK$5,000 per month is paid out to the elderly who have paid premium for 40 years. The premium rate is 16.8% of the monthly income of the insured, which is shared equally between the insured and their employers, and the Government also contributes an equal amount. The Scheme also covers the self-employed persons, students and housewives. As the details involved are rather complicated, I will not go into details here.

Noting that retirement protection is regarded as a right rather than welfare in Japan, the delegation is impressed by Japan’s universal retirement protection. The delegation notes that the general public in Japan accepts using government revenue to maintain the scheme as they consider that the contributions of the elderly to the society should be duly recognized. The delegation is of the view that in considering retirement protection for the elderly, the Government should follow values of the retirement protection system in Japan which stems from respecting elderly persons.

I very much agree that Hong Kong should uphold the virtue of respect for the elderly and help the elderly in poverty. While we acknowledge the merits of the NPS of Japan, we should also identify its shortcomings. I do not fully understand the Japanese system but from the information available, I can see that the NPS imposes a very heavy burden on Japanese society. The NPS was implemented in 1985 after revising the original scheme. At that time, the Japanese economy was at its peak and was strong enough to support the operation of the NPS, but after the burst of the economic bubble in the 90s, the NPS has gradually become a heavy burden on Japan. As pointed out in the report, the Social Security System in Japan has been under pressure as its elderly population continues to grow. In the 2012 financial year, Japan’s social security payment amounted to HK$10.7 trillion, representing 22.8% of its Gross Domestic Product, of which 49.1% was pension payment.

Owing to the heavy financial burden, the Japanese Government has been increasing its national debt to finance its expenditure. Recently, the Japanese Government has taken the opportunity of the rebound of its popularity rating to substantially increase the sales tax from 5% to 8%, and may even increase to 10% in future to finance the expenditure on various social security measures. I do not know if the Japanese people support the tax increase, but if Hong Kong has to increase tax to support a heavy burden and the tax is likely to keep increasing in the future, I am sure Hong Kong people will raise strong objection, let alone the introduction of the sales tax. In addition, even with the tax increase, the NPS may not be sustainable. Japan has already raised the age eligible for the NPS from 60 to 65, but the public are still worried that the Japanese Government may not be able to sustain the NPS in future and has to raise the eligible age to 70. Even so, it may still be unable to pay out the pension.

On that other hand, the delinquency ratio of the NPS is very high. According to some analyses, there are signs of the hollowing out of the NPS. Though I do not have first-hand information, many information or studies point out that as many as one third of the population default on premium payment or refuse to join the NPS. Even though the NPS is a universal scheme, people who default on premium payment do not have to bear any legal liability and they will only be excluded from the protection under the public pension protection system. Apart from poverty and unemployment that cause the default, many people refuse to pay the premium even though they can afford to do so. These people are mainly self-employed persons or young people and as pointed out by the analyses, they do not have confidence in the pension system and the Japanese economy. At the same time, many young people are unwilling to pay the premium to support the pension for the present retirees and they also fear that by the time they retire, they may no longer be able to receive any payment. I dare not say that the Japanese system is rife with problems but certainly there are a lot of problems. At least, the Japanese Government has a hard time in financing the NPS.

The reason why I spent so much time discussing the Japanese retirement system is to show Members the two sides of a coin and help them understand that while the NPS can provide certain protection for the retired elders, it will impose a very heavy burden on the whole community and many young people in Japan are unwilling to bear this burden. As a matter of fact, Hong Kong is facing the same problem of population ageing. When we study the universal retirement protection, we have to draw on the experience of Japan and introduce a plan that takes into account the economic feasibility in the long run. If a plan cannot attain long-term economic sustainability, it is still useless no matter how good it is. At the same time, we must also consider the wishes of the people, especially the wishes of the middle class and young people, and understand whether they are willing to join similar plans and make contributions.

Personally, I believe that many middle-class people or rich people do not need help from society when they retire and society should spend the resources on the needy. However, owing to the restrictive nature of the Mandatory Provident Fund (MPF) scheme, it cannot provide sufficient basic protection to the low-income and no-income groups. Hence, it is necessary to reform the retirement protection system in Hong Kong. I think Hong Kong should maintain its multi-layer and multi-pillar system, with the MPF as the major pillar and complemented by other retirement schemes, so as to provide elderly people in poverty with decent retirement protection. But the new system should be means tested to prevent abuse. However, the eligibility limits can be gradually raised and some assets, such as the deposit in the MPF account, should be exempted from calculation, so that more grass-roots people can be benefited. I believe that this direction of reform is relatively simple and workable. The Government can take into account of its capability and concentrate the resources on helping those in need.

I so submit.

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