Economic Consequences of Universal Old Age Social Pensions
Economic Consequences of Universal Old Age Social Pensions
In this chapter, the author provides estimates of the long term cost of having a universal social pension scheme that offers every individual aged over 65 a fixed monthly payment. Universal schemes are particularly costly because everyone is eligible, and that Hong Kong's population is ageing rapidly and the total population growth is slowing down. This implies that more recipients will have to be supported by fewer contributors to the schemes. This chapter also compares the means-tested schemes with the universal non-means-tested ones. They are compared in terms of the tax revenue increase required to finance the larger old age social security expenditures as well as the years it will take to deplete the accumulated fiscal reserves of $600 billion. The author concludes that a modest payout under the means-tested scheme to help the impoverished in their old age is the only sensible policy option for Hong Kong.
Keywords: Universal social pension scheme, Universal schemes, Means-tested schemes, Tax revenue, Fiscal reserves, Policies, Hong Kong, China, Economy
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