Annuity idea good but short-lived

Editorial | Mary Ma 28 Oct 2021

Some might be tempted to question Labor Secretary Law Chi-kwong's mental status after hearing him first warning them to brace for a probably compulsory switch of their Mandatory Provident Fund savings into annuities - and then learning that he rejected the idea totally as "absurd."

It's difficult to bridge the poles-apart thoughts, and the back-and- forth has surely cast him in a bad light.

In the last general meeting of the extended legislative session, Law was categorical that the idea of demanding every worker turns their MPF savings into annuities wasn't going to happen, sounding the death knell to what he had apparently called for in a media interview a month ago.

It's fine to retract an idea, especially one that's half-baked or even raw, since to do so is common in politics.

However, smart politicians would have done so skilfully - and Law clearly isn't one of them.

There is no problem with the concept of annuities since this is already a common practice in a number of countries. Although the British, Canadians or Singaporeans call their retirement benefits pensions, theirs are also a kind of annuity.

What really matters is the mechanism of how these pensions or annuities operate.

In the UK, a percentage is automatically deducted from salaries to contribute to the national insurance scheme that will pay them a state pension after retirement.

The amount varies, depending on one's contribution over the years.

Law made a mistake that he could have easily avoided when sounding out the idea prior to the policy address.

At that time, he failed to elaborate on how the switch to annuities might take place and how workers would be paid after making the switch.

Had he done so ,together with a few examples based on different income levels, the debate might have developed in a different direction.

Although he was right to say subsequently that it would be vital to give workers a choice, it will now require twice the effort to salvage the idea after playing high on the mandatory option from the start.

It was no surprise that even pro-government lawmakers like Regina Ip Lau Suk-yee and Paul Tse Wai-chung also sniped at the ex-Democrat during the question and answer time.

The idea of annuities isn't new to Hongkongers.

The Hong Kong Mortgage Corporation currently runs a public insurance product to provide residents aged 60 and older a monthly return for a premium of between HK$50,000 and HK$3 million.

Assuming a yearly return of 5 percent, the monthly amount receivable is between HK$208 and HK$12,500.

Certainly, this is only one of the numerous plans available in the market and people can choose the one most suitable to them.

It was not the first time the labor chief had sounded out a policy idea without the backing of an elaborate blueprint at the same time. Not knowing the substance, who would spare time to give it any serious thought?

Maybe Law himself was not convinced when he suggested it.

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