This week’s #fridayfive takes evidence from a thinkpiece for ILC-UK by Dr Matt Flynn which explores what lessons UK policymakers might learn from pension policy in Hong Kong.
- The Hong Kong population is ageing faster than the UK’s with the 65+ population projected to rise 260% by 2041 and has one of the lowest fertility rate globally (only 1.1 births per woman of fertile age).
- The Hong Kong Old Age Pension, known colloquially as “fruit money”, is less than 60% of the absolute low income threshold (similar to the UK state pension).
- By 2018 when the Hong Kong Workplace Pension is fully rolled out, pension contributions will total 8% (4% employee contribution, 3% employee contribution; and 1% government contribution in the form of tax relief based on annual salaries of between £5,824 and £42,385 per year).
- Although the OECD has found that the UK pension system has the third smallest net income replacement rate in Europe (41.8%), it is still higher than that of Hong Kong’s (36.8%). Overall household savings in Hong Kong is eight times that of the UK’s (27% versus 3.4% family income)
- In 1992, over a million employees in Hong Kong were members of an employer provided pension scheme. Now, that figure is 383,000. By 2000, final salary pension schemes were closed to new employees in the civil and public services, and today only 3.5% of Hong Kong workers contribute to a defined benefit pension.
For more detail see Pension coverage and pension freedoms: Lessons from Hong Kong