Ten years ago, the Mandatory Provident Fund Scheme (MPF) was set up to fund retirement for an ageing population. MPF is supposed to be a scheme that helps people to enjoy decent retirement in their old age. But is it really the case? It seems that we are hiding our heads in the sand by pretending that our retirement protection policy is all right with the MPF in place.

The failure of Hong Kong’s current retirement protection policy are two-fold. First, it does not protect the homemakers and low income workers, many of whom are women. Second, as the global financial crisis in 2008 had showed us how trillions of dollars could be lost in financial investments in a short period of time, the future investment returns of individuals’ MPF accounts are not entirely predictable.

• a public pillar that provides a social safety net
• a privately managed, funded pillar that handles people’s mandatory retirement savings
• and a voluntary pillar for people who want more consumptions in old age

MPF is supposed to be one of the pillars. However, it is a weak pillar. The compulsory contributions from employer and employee are too small, and the MPF fund management costs, as well as other fees and charges, are on the high side.

MPF does not insure against the risks of low investment returns because of poor individual choice, economic tsunami or longevity. Therefore, MPF would be grossly insufficient on its own, especially for people who have already reached middle or old age.

While MPF does not address the problem of poverty among those with low incomes, private savings will also be a weak pillar given the income divide and the large percentage of low income earners. It is sad to see so many of our workers having to toil for 12 hours a day, six to seven days a week but earning so little that can barely support themselves, not to say their families. And we are supposed to be living in a first rate economy with GDP per capita at more than US$30,000！

We can no longer pretend that the problem does not exist, both for moral and economic reasons. The low income earners can’t make any savings now and their earning capability is further diminished by old age. Some have to supplement their old age allowance with meager income gained from doing odd jobs. Some live in shabby conditions like a cageman.

The problem will become bigger in the future. Comprehensive Social Security Assistance (CSSA), supposedly our safety net of last resort, will be a weak pillar too because of its non-contributory nature. CSSA will become an increasingly heavy burden given the weaknesses of the former two pillars.

CSSA expenditure last year amounted to $18.6 billion, a 43% increase over the last decade. Its share among total recurrent government expenditure increased from 7.5% in 1998/99 to 8.6% in 2008/09. At the end of 2008, 53.4% of all CSSA cases belong to the old age category. This figure will rise steadily but surely given our ageing population, the declining birth rate, and the increasing wealth gap.

About 1 in 5 of us are now in the 60+ category. In 20 years, the ratio will be 1 in 3. It is clear that we are now almost too late to plan for an adequate retirement protection policy.

Why should EOC care? Because 680,000 homemakers, 98% of whom are women, are totally unprotected. Because a quarter of a million very low income workers, 65% of whom are women, are grossly under-protected. And because many women in elementary occupations are still earning much less than their male counterparts.

Divorce rate has been on the rise steeply. Now 1 in 3 marriages break down in time. We can anticipate many of the homemakers who are without substantial income may become single parents. Without adequate child care and community support services, single parents face difficulties in finding jobs, not to mention retirement planning.

Our fast-ageing population is straining resources. Medical care and social services are not going to be sustainable without major policy reform. As members of the Hong Kong Retirement Schemes Association, you have long been engaged in efforts to promote training, best practice and sound retirement schemes governance in Hong Kong. Today I call for your continuous commitment to increase awareness of retirement protection within the community and find ways to help your clients better plan for their retirement.

As the baby boomers are rapidly heading into their retirement years, we will need to pull our heads out of the sand and do something about it before it is too late. In solving Hong Kong’s pressing ageing issues, we need more discussions to come up with policies that work for the betterment of Hong Kong.

The ones who are toiling in the kitchen or on the streets now, what will their future look like in 20 years’ time? Where are we as a society heading? The consequence of indifference and inaction would be horrendous. I strongly urge the Government to review the current MPF scheme and look seriously into other options to stop our ageing community sliding into this black hole.