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Universal pension plan would create more problems than it fixes

Jeffrey Lam worries that the burden on young would be too high

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The ageing population and decades of low fertility will lead to a shrinking workforce after 2018. Photo: K. Y. Cheng

With an ageing population and a declining workforce in Hong Kong, any universal pension scheme will place a huge financial burden on young people.

It seems ironic that, on the one hand, some are calling for such a scheme because the population is ageing fast and many old people will have no one to take care of them. Yet, on the other hand, we can foresee that the scheme would be financially unsustainable. So, why should we set up a universal pension scheme?

Don't get me wrong, the business community is willing to help people in need and often work hand in hand with local organisations to help the less privileged.

The question we are all facing is not why we can't alleviate old age poverty, but how it could be done, especially in making sure that a system does not create more problems than it seeks to solve.

The ageing population and decades of low fertility rates will lead to a shrinking workforce after 2018; fewer people will contribute to a universal pension, if there is one. According to the calculations by academic Nelson Chow Wing-sun, the pension scheme would record a deficit from 2026 onwards, which means the pension pool would collect less money than it pays out, and could not be sustained after 2041.

Of greater concern is how the pension scheme would affect our young people. If, for example, a pension fund was put in place, almost all retirees would immediately become beneficiaries of the scheme to which they had not contributed. It would be today's workforce that is footing the bill. And when part of the current workforce retires in a decade or so, one generation's contributions will have to pay for two generations' benefits.

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