Optional Retirement: a way forward for Hong Kong

Presented by Professor CHAN Cheung Ming, Alfred BBS JPChair Professor of Social Gerontology

Director, Asia-Pacific Institute of Ageing StudiesLingnan University

18 August 2008

Content

• Background information • Aim & method of the

study• Results• Recommendations

Impacts of an Ageing Society

ExtendedLongevity

ReducedMortality

Feminizationof Ageing

PopulationAgeing

DecreasingSupport

Ratio

DecliningFertility

Changes inPopulation

& social Structure

Population & social changes: impacts on attitude & work

Global Developments Challenging Traditional Work

Policies

Changing Attitudes:-can’t work because of retiring?-- retiring because can’t work?- state, family or individuals?

Market Domination:-health improvement leading to long life

- economic prosperity leading to low fertility

Demographic Transition:- Delay work entry- delay marriage- delay old age- feminization

-ve impacts: Public costs for retirement

a)Rising Pension costs

b)Loss in productivity

c)Loss in person’s dignity

+ve impacts: The “Demographic Dividends” & the population window

• High ‘reserve labour’ increase labor supply– Larger numbers of potential mature workers– More women in the labor force

• Low fertility high savings on child & youth expenditure– People prepare for old age by monetary saving, not

by relying on numbers of children pensions– Pensions create monetary reserves for investment Demographic dividends in the next 10-15 years

when ageing rate is not so steep

Probable measures: optional/progressive retirement

leaving work G..R..A..D..U..A..L..L..Y:

Age 45 50 55 60 65 70 75+

Off wk

1/5 2/5 3/5 3/5 3/5 4/5 Vol wk

& learning new things/volunteering in between

Older workers are ‘no good’?Evidences against –ve stereotypes:

1. Older workers are usually willing and enthusiastic about learning new skills.

2. Older workers can learn, although not in the same way as younger workers. Training techniques may need to be adapted to take account of this difference.

3. Older workers are often able to compensate for physical declines.

4. Older workers are generally healthy. 5. And older workers have lower absenteeism and less turnover.6. Older workers have been found to be more reliable,

conscientious, and loyal.7. One can adjust some workers’ salaries if productivity

warrants. An operational example is Japan’s “reemployment” policies.

8. Age is not the key factor. Differences in performance within age groups are far greater than those between age groups.

Modified WHO Framework for Active Ageing Policy for HK

Security

Participation Health Maintenance

Financial

individuals– Safe for self + others

Government: for the needy:Shelter + ensuring safe living

Individuals – Save for old age when young

Government:: supportfor the most needy, a safety net

Physical Environment

Elder Learning

Self driven, health-focused

Govt facilitates

Individuals :giving culture

Govt. recognized training & facilitation

Volunteering

Individual

Ensuring a Basic system

Self – healthy living

Gov’t – ensure healthy Environment for an individual

Self – self + neighborhood care

Gov’t – ensuring a sound & accessible health service

© Prof. Alfred Chan, APIAS, Lingnan University

ACTIVEAGEING

Retirement & P-t employment

112/04/21 "Population and Development Review," Vol 26, supp.

10

• According to David Bloom: “The demographic dividend accounts for between one … and two-fifths of East Asia’s economic miracle.”

• But that dividend was not inevitable. It required a suitable economic and political environment – including government policies related to older-person-power.

a desirable policy: optional retirement

The “Demographic Dividends” rely on a labour policy

Q: how is an optional retirement policy possible in

HK?

Aim & Method:1. To review other countries’ policies &

practices for optional/mature/progressive retirement with a view to adopt and/or modify the same for Hong Kong

2. Method: literature & documents review

Country Retirement Policy Summary (I)Country Scheme & Hrs

ReductionMin. Age Career

RequirementEnd of the

SchemeIncome & Incentive

(besides PT pay)Compensatory Recruitments

Key Mechanism

EUR 1) Austria: PT work for older workers.

FT can work up to 28hrs/wk

& PT up to 70% of previous hrs

2) Belgium, Norway, Netherlands, Finland, Denmark, etc: Partial Pension, Variable hrs Reduction

Men: 55 Women:50

Public Sector Unemployment insurance/ Pension contributions for at least 15yrs in the last 25yrs;

Private Sector

a) FT employment for 12mths during last 18mths;

b) 5yrs of pensionable employment during the last 15yrs

It depends on the scheme. Some is early retirement age (Men: 61.5; Women: 56.5) some is 65, no age limits now being considered

Worker: at least 50% of the pay reduction.

Employer: Labour Market Service pays 25% of gross pay and covers social contributions exceeding actual working hrs/ Worker: proportionate ‘partial pension’/ career break benefit/ Worker: unemployment benefit & supplementary compensation

Repealed in 2000. No longer required/ None/ Obligation to replace employee with unemployed worker (some exceptions)/ Employer must hire an unemployed worker (some exceptions)/ Obligation to recruit replacement

Govn’t/ Equal Opportunity for employment:ability NOT age to work

UK Flexible retirement/ PT work: job share

Men: 65

Women:

60

(default age of 65 is not mandatory retirement age

Eligibility for a pension/ a year health check with Occupational health and welfare

Nil (No official retirement age)

Partial pension and Flexible location working/ seasonal working

Nil Employers Forum on Age

Canada 55+

Employees &

Retirees

Men: 65

Women: 60

Eligibility for a pension/ ability to maintain employment and skills

Not mandatory/ depend on ability

Employers &

Employees share

equally the

contribution rate

Self-employed bear

the entire contribution

Nil Govn’t/

Business firms/ Mandatory Retirement Elimination Act Becomes Law etc

Country Retirement Policy Summary (II)Country Scheme & Hrs

ReductionMin. Age Career

RequirementEnd of

the Scheme

Income & Incentive (besides PT pay)

Compensatory Recruitments

Key Mechanism

Japan People aged 20-59 who legally live, work and study in Japan/ Flexible working opportunities

Below 70 Eligibility for a pension

70 Old Age Pension/ Additional old age pension

Nil Business firms/ Govn’t

Singapore Wage Reduction by up to 10%/ Flexi-work

35 over Provides up to $100,000 per company for costs, include redesign recruitment, training, absentee payroll & equipment

67 or above

Employees bear larger share of contribution than employers;

Contribution rate is inversely proportional to employees’ age

Nil Council of Ageing/ The Retirement Age (RA) Act

Australia PT work (e.g. 3 full days/wk)

Job sharing (e.g. 1 person x 2 days/wk & 1 person x 3 days/wk);

Working from home;

PT leave without pay/ Career break scheme/ Variable year work/ Part year employment/ Varying flexible hrs arrangement

Nil Ability to maintain employment & skills

Nil Pension and Flexible arrangement on job

Nil Ministry on Ageing/ Equal Opportunities in Public Employment

Hong Kong No specific scheme 50 above (not

compulsory - optional)

Eligibility for a pension

Nil Nil Nil Nil

Need for pro-active policies

• Work: Provide workers with opportunities to retrain, share their experience and wisdom, adjust work schedules, and facilitate transfer to new jobs as production circumstances change.

• Retirement: Discourage early retirement policies that are uneconomical in the long-run; create pension plans that provide adequate income; encourage continued involvement in society; and facilitate (where desired) people shifting to less expensive regions to live.

• Community and Family: Encourage and help older people to do voluntary work; recognizing that the family needs support in its care-giving role.

Recommendations

• For general environment (Education & facilitation)• To provide formal and informal education to people at all ages about the

possible impacts of population ageing• To educate people of all age to save for old age and to stay active (in

employment or otherwise) for as long as possible• To educate people about benefits of optional retirement schemes• To facilitate an environment conducive for a silver hair market

• Labour force participation (continuation to work: new attitude)• To encourage old age or ageless employment.• To facilitate and support employers to adopt fractional employment (e.g. job

share) and optional/progressive retirement, particularly in SMEs• To pilot optional retirement within the Government and non-governmental

sectors • To encourage healthy middle-aged people not to retire early and to prepare

well for old age/retirement.• To implement preventive measures to deal with women poverty.

Recommendations

• Business enterprises• To encourage workers to prepare for retirement, gradually.• To retain retired workers as mentors, paid or voluntary or

as reserves

• Fiscal measures• To explore and implement measures to maintain stable

revenue in facing increasing expenditure vis-à-vis population ageing.

• To research into reasons for late marriage and avoiding to have children, as well as feasibility and consequences of importing young labour for industries with labour shortage

Recommendations

Recommendations

• For Old age protection:• Public Scheme

– To consider establishing mechanism to allocate CSSA/OAA to those in need– To review qualifying age for OAA– To postpone the retirement age gradually from 65 to 68 or 70 then no-age

limits– To promote optional and fractional employment or retirement in old age.

• Mandatory occupational scheme– To allow more flexibility in the operation of the MPF scheme through (1)

changing the lump-sum benefit to scheduled withdrawal; (2) widening the contributory wage to make employees save effectively for their retirement projection, and

– To discourage early retirement by putting penalties to early MPF draw downs

– To encourage top ups to MPF by offering incentives schemes

Recommendations

• Older workers resources– To set up a data bank and a resources centre for

matching people with work or voluntary work. – To set up training centres for older workers who need to

be trained for specific types of work e.g. elder- or baby- sitters.

– To encourage retired professionals to work as mentors, paid or voluntary

– To encourage retired workers to participate in voluntary work through the Elder Academies in their districts.

• Around the world, older people want to contribute, pay their way, and remain a part of society. They want to leave a legacy to future generations. To push them aside or to ignore their wisdom, talents, and experience is not only cruel but makes no economic sense.