Mandatory Provident Funds in Hong Kong: Too Little, Too Late
This article examines the history of the establishment of the MPF and its scope to show that the retirement protection it offers is belated and inadequate. In particular, it argues that, on the one hand, the delay and limited scale of the MPF are due in large part to factors such as the reluctance of the government to provide income protection for the elderly, the predominant influence of the vocal business sector, and the absence of a democratically elected and powerful legislature. On the other hand, the democratization of the legislature has been a major factor in bringing forth the MPF, even though this is not the ideal solution preferred by the general public.
Essay : Prospects for Old-Age Income Security in Hong Kong and Singapore
This review shows that Hong Kong and Singapore face a distinct and serious challenge to old-age income security due to their mix of public pension provision and intergenerational family support. They are among the fastest ageing societies internationally and will be the oldest in Asia after Japan by 2030. Yet their public pensions remain weak. Defined contribution pensions, even for full-career workers, are projected to replace just 17% of net lifetime average earnings in Singapore and 41% in Hong Kong, compared to 70% across the OECD countries. Instead, older persons in Singapore and Hong Kong depend mainly on their adult children for income security in the form of co-residence and cash transfers. More than half of them live with adult children. In Singapore, more than two-thirds receive financial support from the younger generation, compared to just 5% on average in Europe. Current welfare theory would suggest that Singapore and Hong Kong portray an extreme variant of welfare regime where the state’s role is more limited than in the liberal regime and the family’s role more central than in the Southern European regime. The sustainability of current old-age income security arrangements is therefore particularly vulnerable to new social risks that threaten the stability of traditional family structures. Already co-residence and financial support from adult children are declining. A fuller assessment of the prospects for oldage income security must focus on the interaction of pension policy and family support for elderly persons in different gender and income groups.
Pension System Reform: The Mexican Case
The paper analyzes the Mexican pension reform of December 1995. Essentially, the reform substituted a defined-benefit pay-as-you-go system with a fully funded defined contribution system based" on individual accounts with a minimum pension guarantee provided by the government. Total contributions to the accounts will amount to 13.5 percent of the salary for the average worker plus 2.5 percent for disability and life insurance that will still be managed by the government's Social Security Institute (IMSS). The new system shares many common elements with other Latin American experiences. However, it shows some advantages and disadvantages with respect to them. Regarding the advantages, the new system completely substitutes the old system; administrative costs are reduced by limiting the number of transfers between pension fund managers to once per year; pension managers are allowed to operate several funds; the law does not establish a minimum guaranteed rate of return for pension funds; and there is a centralized contributions collector agency. Disadvantages include the prohibition of the funds from investing in foreign securities; the IMSS is the sole provider of disability and life insurance; the IMSS will be able to operate a pension fund manager; the housing subaccount offers low returns; there are market share limits; and the new system still faces some portability problems. Finally, we found that the fiscal cost of the transition to the new system is relatively low compared to similar reforms in other Latin American countries.