Fernando Cheung Rebuts Francis Lui: Universal Pensions Aren’t Just “Pay-As-You-Go” — They Can Run 50 Years

Ten years into MPF, HKUST economist Francis Lui wrote in December 2010 that Hong Kong shouldn’t adopt pay-as-you-go pensions — “the West proves it doesn’t work”. Legislator Fernando Cheung rebuts: time for a verdict — Lui’s claims don’t survive the facts.

Why did the old-age pension plan die?

Politics, not fatal design flaws. Lui counts killing Chris Patten’s old-age pension as his “achievement” (he was among 78 scholars who signed against it), but Hongkongers remember: Beijing decided it would squander Hong Kong’s reserves, and Chen Zuo’er’s “the car will crash and people will die” killed it. Co-signatory Professor Chow Wing-sun has since attacked MPF repeatedly, calling it his “atonement”.

What’s Chile’s lesson?

Sky-high admin fees, rock-bottom participation. Only Hong Kong and Chile run this system; Chile’s experience is a bloody lesson Hong Kong is now copying: MPF fees hover at 2%, meaning ~40% of contributions end up with middlemen after 30 years, versus ~1% elsewhere and under 0.1% for US Social Security administration.

Do universal pensions really not work?

Nearly every advanced economy runs some form of universal pension. America’s system has stood since 1935; recent warnings only flag a possible cut to 75% of benefits 27 years out — not collapse. Civic groups proposed a complete scheme a decade ago: not pure pay-as-you-go, with reserves to roll over, designed to run at least 50 years with no government injection.

Would new immigrants free-ride?

No — they’re overwhelmingly women and children. New immigrants are people who can or will work and contribute; and universal pensions would immediately lighten young people’s burden of supporting parents — the “unfair to youth” claim fails. After America’s system launched, elderly poverty fell from 35.2% to 8.9%.