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Safety net needs plenty of work
Published on Friday, 05 Nov 2010
The French protest against proposals to hike the retirement age.

Defying crippling strikes and mounting political costs, French President Nicolas Sarkozy will this month sign a law raising the retirement age from 60 to 62.

Protests in Paris may be as Gallic as absinthe and Gauloises, but the mass actions over the retirement-age amendment show that even in the birthplace of liberte, egalite and fraternite, social security is a work in progress.

In Hong Kong, there is talk of optional retirement, allowing people to work beyond the customary 60 years. If Hong Kong proceeds with this idea, it will join Japan, Singapore, the United States and the European Union, which all have optional retirement. Even Shanghai has given workers and employers the option to postpone the retirement age by about five years.

But beyond flexible retirement and greying part-timers, the core issue is how much one gets in retirement. In short, it's all about the size of your nest eggs.

Hong Kong's Mandatory Provident Fund (MPF) Scheme, envisioned as a universal pension system, was introduced in 2000 but has been hobbled by low contribution rates.

Right now, with the gravity-defying performance of the Hang Seng Index, it seems ill-timed to be worrying about pensions.

But tracking one's MPF has become increasingly bewildering to the average Hongkonger, what with capital preservation, portability, preserved accounts and the growing menu of funds for asset allocations. As reported here, most Hong Kong people can hardly be bothered monitoring their MPFs.

The government should work with the private sector to simplify the system - make it more transparent, strengthen regulations to avoid abuses, educate the public, and encourage competition among MPF trustees and managers to ensure innovative fund products and lower management fees.

Any pension system - no matter how noble its founding intentions - is imperfect and non-perfectible. The best it can do is make sure nobody falls through the gaps of the social security net. Sadly, in Hong Kong, that net is frayed or in tatters. But it doesn't mean one has to stop weaving.


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