Of the 34 800 elderly people who claimed to have financial needs

Living in CSSA households : 48 800 people

Claimed to have financial needs : 34 800 people

Not receiving any social security benefits : 17%

Receiving OAA or DA : 25%

Receiving OALA : 58%

Claimed to have no financial needs : 143 400 people

Others : 66 900 people

Views can be sent via the following channels :

Website : rp.gov.hk Email : views@rp.gov.hk Fax : 3904 5996Post : Labour and Welfare Bureau

(Public Engagement Exercise on Retirement Protection), 10/F, West Wing, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong

Facebook page : Retirement Protection Forging Ahead

Enquiries : 3142 2303

Commission on Poverty

Shall we introduce a “those with financial needs” option and add a new layer of allowance between CSSA and OALA? What should be the income and asset limits? What level of allowance would be considered adequate?

Strengthening the retirement protection function of MPF

* Properly address the “offsetting” issue

* Explore the feasibility of raising the contribution rate upon full implementation of the Default Investment Strategy

Reduction of fees

* Implementing the Default Investment Strategy in 2016

* Setting up a centralised electronic platform eMPF

* Implementing “full portability” of MPF benefits in the long run

Measures and directions to strengthen MPF

MPF “Offsetting”* The community should conduct thorough and in-depth discussion

on the impact of the feasible options for properly addressing the “offsetting” issue on employers and employees as well as the role of the Government, endeavouring to find a way acceptable to both employers and employees

* Instead of making a simple choice of whether to retain or abolish “offsetting”, the community should consider ways to rationalise the relationship between severance payment / long service payment and the MPF System

* The community should discuss mitigation measures which can be adopted to reduce the impact of any changes on the business sector (especially the SMEs) and the labour market

Do you support the above measures and directions? What are your views on how to properly address the “offsetting” issue?

* To enhance public understanding of different kinds of insurance and financial products that will help people plan their retirement life or manage their wealth

* To encourage the market to develop more financial products suitable for retirement investment and wealth management

* To provide tax concessions to incentivise voluntary retirement savings

* To study the feasibility of public annuity scheme

Do you support the above suggestions ? Do you have any other suggestions?

Personal Assets ( Fourth Pillar )

Family Support ( Fourth Pillar )

Public Services ( Fourth Pillar )Mandatory Provident Fund ( MPF )( Second Pillar )Social Security ( Zero Pillar )

Strengthening the Existing Four PillarsNote

Means to further encourage voluntary savings :

Voluntary Savings ( Third Pillar )

Subsidised Housing More than half of the elderly people in Hong Kong live in subsidised housing units.

Public Healthcare In 2014-15, the expenditure on public healthcare services for the elderly people was $23.9 billion. In addition to in-patient and out-patient services, geriatric day hospitals, outreaching services for discharged elderly patients, the Elderly Health Care Voucher Scheme, etc. are also in place.

Home, Community and Residential Care In 2014-15, the recurrent expenditure on community and residential care for the elderly was $6.2 billion. The Government is increasing the number of residential care places and day care service places for the elderly, supporting carers to take care of the elderly people living in the community, piloting a voucher scheme on community care services for the elderly, and conducting a feasibility study on a voucher scheme on residential care services for the elderly.

How should the above public services be planned to meet future needs?

At present, the social security system comprises the Comprehensive Social Security Assistance (CSSA), Old Age Living Allowance (OALA), Old Age Allowance (OAA), and Disability Allowance (DA), benefiting about 73% of the elderly people in Hong Kong.

Elderly Poverty SituationAbout 290 000 elderly persons were living below the poverty line in 2014, but about half of them claimed to have no financial needs:

Some elderly people have self-owned properties. Yet, worried by the risk of outliving their own savings, they limit their daily expenses and lead a frugal life. At present, there are about 250 000 elderly people residing in self-owned properties with no mortgage (including private properties and Home Ownership Scheme flats).

Note As Hong Kong does not have any publicly-managed mandatory contributory plans, there are no arrangements in Hong Kong belonging to the first pillar under the five-pillar model advocated by the World Bank. The World Bank does not indicate that a comprehensive retirement protection system should comprise all five pillars.

Amount of monthly paymentAsset limit for elderly singletons : $43,500With income test

Asset limit for elderly singletons : $210,000

Monthly income not exceeding $7,340

CSSA $5,548 ( the average monthly CSSA payment for elderly singletons )

OALA $2,390

Current policies and measures to encourage and support care for elderly family members :* Dependent Parent and Dependent Grandparent Allowance* Tax deduction for elderly residential care expenses* Schemes that encourage public rental housing tenants to live with or move

closer to their elderly family members

How to further encourage and facilitate family support for the elderly?

What is Reverse Mortgage?Reverse mortgage helps elderly people take out loans from banks by using their properties as collateral. By doing so, an elderly borrower can receive a stable monthly payout and continue to stay in the original property to age in place.

How to help those “asset-rich, income-poor” elderly people to increase their post-retirement income? Should the reverse mortgage be made more appealing to the elderly? Should the elderly people be assisted to let out the whole or part of their properties through social enterprises?

Public Engagement Exercise on Retirement ProtectionPlease send in your views on or before 21 June 2016

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PrincipleRetirement protection is a basic right, not a welfare benefit.

Thus no means test should be imposed.Public resources should be targeted towards helping needy elderly.

Eligibility CriteriaAll elderly people aged 65 or above To introduce a new layer of support beneath the Old Age

Living Allowance for the following elderly people:Elderly singletons with assets of no more than $80,000 and a monthly income of no more than $7,340Married elderly couples with assets of no more than $125,000 and a monthly income of no more than $11,830

Payment$3,230 monthly (2015 prices) $3,230 monthly (2015 prices)

Annual Increased Expenditure

Rise from $22.6 billion in 2015 to $56.3 billion in 2064 Rise from $2.5 billion in 2015 to $6.0 billion in 2064

Overall Increased Expenditure for 50 years$2,395.0 billion $255.5 billion

Who foots the bill?*

Elderly

ExpenditureSocial security benefits

for the elderly ( 2 times )Elderly public healthcare

services ( 3 times )Residential and community care

services for the elderly ( 3 times )Public transport fare concession

scheme for the elderly ( 4 times )Elderly Health Care

Voucher Scheme ( 4 times )

Tax Revenue

Owing to shrinking labour force, economic growth will decelerate, leading to a slowdown in tax revenue growth.

Public Finances will Face Pressure of Deficit ProblemAt present, expenditure on the elderly accounts for about 20% of total government recurrent expenditure. By 2064, it will be two to four times the current expenditure.

Respective payroll old age tax rates for employers and

employees

Monthly income<$11,000# 1.6%

Monthly income$11,000 to < 22,000 2.4%

Monthly income $22,000 3.9%

Profits tax

raised by 4.2 percentage points

Introduce goods and services tax

tax rate equals 4.5%

Salaries tax

raised by 8.3 percentage points

Challenges of Ageing Population Simulated “Regardless of Rich or Poor” Option

Illustration of the Two Simulated Options’ Impact on Tax Payment

2014 2018 2064

3.60 million

3.65 million

Labour force 3.11

million

Should we adopt the “regardless of rich or poor” principle and provide a uniform payment for all elderly people, or adopt the “those with financial needs”principle to pool resources to support the elderly who are in need? What are the justifications? How much extra tax are you willing to pay?

or or

or or

or or

or or

Raising Profits TaxExample : A company with a profit of

$10 million ( the current tax payment is $1.65 million for a year )

* Simulated “Regardless of rich or poor” option : Additional payment of around $420,000 for a year

* Simulated “Those with financial needs” option : Additional payment of around $40,000 for a year

Rapidly Ageing Population in Hong KongAt present, the elderly population is around 1.12 million. By 2040, it will increase to 2.47 million, accounting for about 1/3 of our population.

Shrinking Labour Force, Increasing Dependency Burden

Simulated “Those with Financial Needs” Option

Profits tax

raised by 0.4 percentage points

Introduce goods and services tax

tax rate equals 0.5%

Salaries tax

raised by 0.9 percentage points

Respective payroll old age tax rates for employers and

employees

Monthly income<$11,000# 0.2%

Monthly income$11,000 to < 22,000 0.3%

Monthly income $22,000 0.4%

Raising Salaries TaxExample : A single taxpayer with an annual

income of $270,000 ( the current tax payment is $13,500 )

* Simulated “Regardless of rich or poor” option : Additional payment of around $7,400 for a year

* Simulated “Those with financial needs” option : Additional payment of around $800 for a year

Introducing Goods and Services TaxExample : A four-person household with a

monthly expenditure at around $25,000, among which around $17,000 is subject to goods and services tax ( there is no goods and services tax at present )

* Simulated “Regardless of rich or poor” option : To pay around $9,200 for a year

* Simulated “Those with financial needs” option : To pay around $1,000 for a year

Introducing Payroll Old Age TaxExample : An employee with a monthly

income of $15,000 ( there is no payroll old age tax at present )

* Simulated “Regardless of rich or poor” option: Employer and employee to pay around $8,600 in total for a year

* Simulated “Those with financial needs” option: Employer and employee to pay around $1,000 in total for a year

*The tax rate or increase in tax rate on average from 2015 to 2064 #Only the employer will pay the tax if the monthly income of the employee is below $7,100

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