Ten billion in silver bonds to start selling alternative sugar next month is not enough for the elderly

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Written by: comment editing room

2020-11-12 17:00

Last update date: 2020-11-12 17:00

The government announced on Wednesday (11th) the issuance of the fifth batch of "Silver Bonds" with a total amount of 10 billion Hong Kong dollars for Hong Kong residents 65 years of age or older to subscribe.

The guaranteed interest rate this time is 3.5%, which is not only a half% higher than last year's similar products, but also higher than the seventh batch of inflation-linked bonds (iBond) issued earlier.

But this is only generously giving the elderly a lot of pocket money. In the face of the potential worries and pressures of the aging population, officials must do more.

According to the details of the plan, the issuance target of the fifth batch of silver bonds will be raised from the previous 3 billion Hong Kong dollars to 10 billion Hong Kong dollars. The government will consider increasing the issuance amount to 15 billion Hong Kong dollars depending on market reaction.

The term of the bond is three years, and the holder will receive interest linked to local inflation once every six months, but the interest rate will not be less than 3.5% of the guaranteed interest rate.

However, unlike iBond, there is no secondary market for silver bonds, so if holders intend to cash out early, the government will redeem them at the original price and accumulated interest. In order to avoid excessive bond concentration, the government also restricts each investor Only 100 lots of bonds can be issued.

The entrance fee for the Silver Bond is as low as 10,000 yuan, and even the elderly with a small principal can "make tea money."

(Photo by Ou Jiale)

The government should prepare for aging

As global central banks strengthen their quantitative easing and the low interest rate environment continues, the attractiveness of silver bonds is not only higher than iBond, but also comparable to blue chip stocks, and the asset quality is better. Therefore, the outside world is generally expected to have a warm subscription response.

Even though the interest rate of the bank bonds is attractive, it does not violate the government's goal of "providing a stable return on investment products for elderly residents to help them effectively manage retirement capital." However, if retired citizens lack adequate protection, such measures can only be used at best. It buys people's hearts like a candy, but it doesn't really make people old.

Since the government is willing to mobilize resources to implement an "alternative sugar" investment plan to allow the elderly to have more pocket money, why not make good use of resources and make investment preparations for the aging society in advance?

This plan is also inseparable from the old investment philosophy of "money" and does not involve industries that require long-term development.

According to government documents, the proceeds from the retail bond issuance program are allocated to a bond fund. Although this fund is not part of the government’s fiscal reserves, but is allocated to the management of the Exchange Fund, if the government does not use it to pay for the repayment of other bond programs Payment of interest is to invest in bond funds with a "long-term and conservative strategy" in the form of "money".

In the past six years, the average annual rate of return earned by the Exchange Fund for bond funds is 3.8%. Even if the government and bank debt holders may not lose money, they will not be able to solve the predicament of Hong Kong after entering an ageing society.

With the ageing of the population, the increase in life expectancy and the extremely low fertility rate, the relative reduction of the working age population will increase the burden of public finances and personal support for parents. Therefore, it is more important to meet the demographic changes in advance.

In particular, the existing Comprehensive Social Security Assistance for the Elderly, Old Age Allowance and Old Age Living Allowance are all elderly benefits that fall short of the wages. Not only can they not make up for the shortcomings of the MPF system, they also fail to provide all Hong Kong citizens with retirement protection that they can rely on.

Therefore, in addition to launching an alternative sugar distributing scheme such as the silver bond, the government must also carefully consider how to ensure that retired elderly people entering their twilight years can enjoy their old age with dignity through the basic protection provided by society.

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