Optional Retirement: Better Choice

15 Dec

Press release

More pilot schemes should be encouraged in the private sector and NGOs to promote optional retirement (OR) as a means to relieve the impact of ageing workforce on Hong Kong’s long-term competitiveness, according to a recent study commissioned by the Bauhinia Foundation Research Centre (BFRC).

A study by the United Nations reveals that Asia-Pacific’s labour force as a whole will shrink by about 10% in the next 10-15 years as a result of the ageing population; Hong Kong will have a similar trend in this respect. OR is a mutual agreement between employers and employees whereby the latter either continue their work after retirement age or make earlier, partial withdrawal from work before the retirement age.

Releasing the study entitled Optional Retirement: Better Choice today, BFRC Director Miss Winnie Ng said: “Our rapidly ageing population will have adverse impact on Hong Kong’s long-term competitiveness as human capital is recognized as the most valuable asset of a knowledge-based economy.”

As with other developed economies, greying of population in Hong Kong is a foreseeable trend characterized by a high elderly dependency ratio and a low fertility rate, which will ultimately add financial pressure on individuals and the society and hinder economic growth.

The proportion of our population aged 65 and above was 12.4% in 2006, and it is projected to reach 26% by 2036. In 2006, every 1,000 working adults (aged 16-64) supported 168 people aged 65 or above. The figure will rise from 168 in 2006 to 425 in 2036. 

“Global experience shows that retired workers equipped with years of experience and skills could become a reservoir of human resources for economies that are facing the challenge of an ageing population and shrinkage of labor force,” said Miss Ng.

In the case of the USA, a study found that postponing retirement of the baby boomers will generate US$12.9 trillion more GDP by 2035. Another study about Canada estimated that if the effective retirement age were increased from its 2001 level (61.2) to 65, real GDP per capita could be 12% higher in the long run.

Having regard to their demographic and socioeconomic conditions, various forms of OR schemes have been implemented in different parts of the world, including the European Union, the United States, the United Kingdom, Japan and Singapore, to address demographic challenges. Their OR schemes are enabled either through collective bargaining or legislation. 

In Hong Kong, there is no statutory retirement age, although most workers and civil servants retire at the age of 60. As part of the study, seven industry leaders from accounting, education, nursing, insurance, social work and public health have been interviewed. They agree that: 

• Continuation of employment should be based on ability and not just age;

• Work after the retirement age is a matter of negotiation and agreement between employees and employers; and

• Those in senior management positions should retire at the set age to make way for younger staff and switch to work as part-time consultants. 

The report notes that OR is not something entirely new to the private sector, but it would be important to promote more pilot OR schemes in enterprises, NGOs and universities after consultation with the relevant stakeholders, including staff unions and employers.

Other recommendations put forward in the study include:

• Implementing public education programmes to raise public awareness of how to make choices for retirement;

• Conducting research into current practices and perception of OR among SMEs to construct the database; and

• Considering establishing an office of the commissioner on ageing issues to lead and coordinate reforms in the relevant labor and MPF practices.

Miss Ng added, “Hong Kong needs to be more proactive in planning for policies regarding work options for the elderly and OR could be a means to address the future potential challenges posed by the ageing workforce.

She cautioned that the adoption of OR must be gradual and that any policy or legislative changes had to be fully deliberated. The potential impact on welfare and social benefits, MPF draw-out, employment contracts, staff promotion prospects and labour insurance also need to be considered.

The study shows that longer work life helps to alleviate labour shortage in the long run, reduce healthcare and other expenditures and enable employees to stay active in the community. Through OR, the skilled and experienced workers can be retained, and they can mentor junior colleagues and transfer working knowledge.