MPF structure keeps pressure off retirement burden of ageing SAR

Retirement ages could be raised as governments around the world seek to delay and reduce their pension responsibilities. But despite its rapidly ageing population, Hong Kong appears to be bucking the trend.

The SAR can afford to go its own way because it has a minimalist social-benefits scheme, and so relatively few payment obligations, and because its primary pension scheme, the soon-to-be-launched Mandatory Provident Fund (MPF), accumulates cash well before benefits are due.

Contrast this with Japan. The Japanese pension system is fiscally unsound, while the population is ageing faster than anywhere else in the world. So dire has the situation become that Prime Minister Yoshiro Mori called last week for workers to be allowed to stay on the job until they are 70.

Raymond Tam Wai-man, executive director of the MPF Schemes Authority, said: 'For Japan, the national pension scheme was designed a long time ago. It is a pay-as-you-go system. But for MPF, it is something that came into being only a few years ago.

'So we already knew that Hong Kong people live long, almost as long as Japanese.' Under the MPF, today's workers save for their own retirements. But under some other pension schemes, such as Japan's, today's workers foot the bill for today's retirees.

That kind of system is known as 'pay as you go', because money is paid out as it comes in rather than being invested for use at a later date.