Mok Tai-kei: Universal Pensions Are Sustainable — Canada’s Model Runs 50 Years Unchanged

The Lion Rock Institute advertised in April 2011 that universal pensions are “sugar-coated poison”, projecting 2.1 million elderly by 2030 costing over HK$100 billion. Hong Kong social-security scholar Mok Tai-kei rebuts: universal pensions are sustainable; the Institute’s claims ignore the facts.

What do other countries do?

Every OECD member with GDP per capita near Hong Kong’s — except Australia — runs pay-as-you-go universal pensions, averaging 31% of national average wages monthly (~HK$5,000 in Hong Kong terms), endorsed by the World Bank as the first public-pension tier. Not one country has proposed reforming or scrapping it.

How long does Canada’s model last?

Fifty years without change. Canada’s 2003 pension actuarial report shows the worker-to-retiree support ratio holding at 2.2 workers per retiree through 2050 and 2075; a 9.9% total contribution rate (4.95% each from labour and employers — cheaper than MPF’s 5% each) keeps assets positive to 2050, paying 25% of average wages (~HK$4,000) throughout.

Even rural China manages it?

Yes. China piloted its new rural social pension in 2009, paying rural over-60s a minimum 55 yuan a month (later 80 yuan — 16% of average rural net income), targeting full coverage by 2015. The author asks: HK$3,000 a month is just 18% of Hong Kong’s HK$16,000 average wage — far below the OECD’s 31% average replacement rate — how could Hong Kong not afford it?

Why is MPF not enough?

It leaves non-workers out. MPF covers no one among a million elderly, 800,000 homemakers and 400,000 disabled people; a median worker earning HK$10,000 who contributes HK$1,000 a month for 35 years accumulates roughly HK$400,000 — under HK$2,500 a month over 18 retirement years, below CSSA levels. Failing half the workforce (1.6 million workers), MPF’s role is very limited.