Think tank backs offsetting scrapTop News | Adeline Mak 27 Jan 2016
A pro-business think tank has sprung a surprise by calling for the abolition of the mandatory provident fund offsetting mechanism.
The Bauhinia Research Centre said the cost to companies is affordable as it would amount to only 0.4 percent of salary expenditures while the annual net profit margin would be lowered by a mere 0.04 percent.
Use of that offsetting mechanism which sees employers use workers' retirement funds to cover severance or long-service payments when jobs end or are axed resulted in 43,500 staff losing a total of HK$3 billion in 2014, government statistics show.
Bauhinia Foundation Research Centre vice chairman Lau Ming-wai endorsed a call by unionists for the offsetting arrangement to be scrapped, saying it was unfair to employees.
"What quality of life can you enjoy with around HK$3,000 per month?" Lau asked.
"Even if the amount is doubled to HK$6,000, the future is still grim if you solely depend on retirement protection by the government.
"If you wish to enjoy a better life after retirement, you have to save money on your own as the payment from the government will never be enough."
Center director Lawrence Lee Kam- hung said the government should specify an effective date for the abolition.
By announcing a cut-off date, he said, employers will be able to use the accrued benefits derived from mandatory contributions before the specified date to offset the provisions.
The center also proposed a public pension for all residents aged 65 and above to replace the current old-age allowance and fruit money, with the amount adjusted on a sliding scale that takes income and assets into consideration.
A full public pension of HK$3,200 a month will be paid to those aged 65 or above who earned less than HK$5,000 a month and had net assets not exceeding HK$50,000.
For every HK$1,000 above the asset limit, HK$5 will be deducted from the pension with the lowest payment being HK$1,235, the current fruit money level.
It is estimated that around 60 percent of those aged 65 and above will benefit from this proposal.
To make the pension sustainable, the think tank suggested the government inject HK$10 billion as one-off seed money, along with an additional 1 percent contribution by both employers and employees based on the latter's incomes. The balance of public pension will remain positive for the next 50 years and reach HK$200 billion in 2064.
It also recommended that the government set up a matching grant to encourage individual voluntary contributions to MPF schemes, with different matching ratios based on income levels. The matching ratio would be higher for low- income earners. It is estimated that government will have to pay HK$4.6 billion every year while attracting an additional HK$9.2 billion.
The government has proposed a "those with financial needs" option with an economic means test; a monthly allowance of HK$3,230 for elderly with assets below HK$80,000 and a monthly income below HK$7,340.