Published in: Macau Daily Times
By Poyi (Natalie) Leung
An actuarial report suggested it is necessary to increase residents’ monthly contributions by at least 33 patacas to the Social Security Fund or the government funding by three percent annually, in order to ensure the fund’s long-term operations after the double-tier social security system fully comes into effect.
The Legislative Assembly’s Third Standing Committee held a meeting with government representatives yesterday to discuss the bill to revise the existing social security system.
The system, along with the non-mandatory central saving scheme, are going to form the double-tier social security system aimed to provide enhanced protection to Macau people’s retirement lives.
Committee president Cheang Chi Keong said after the meeting that the government had presented a “very important” report, which was compiled by a consulting firm Watson Wyatt Worldwide to forecast the additional expenditure to the government triggered by the implementation of the new social security system in the next 30 years.
The bill proposes to extend the current social security system to non-employee Macau permanent residents at the age of 22 or above.
A standard contribution period of 30 years is also proposed and contributors will collect their pro-rata age pensions according to the number of years they have contributed to the Social Security Fund (FSS).
Macau’s age pensions currently stand at 1,700 patacas per month.
The FSS’ main source of income consists of contributions from employers and employees amounting at 45 patacas a month, as well as the SAR government’s annual funding which reached 1.3 billion patacas in 2009.
As of December 31, 2008, the FSS had a total asset of 3.801 billion patacas. The actuarial report then estimated that this value would come to 4.767 billion patacas at the end of 2009.
After the double-tier social security system is introduced, which the government expected will be this year, the expenditure of age pensions will increase due to the expansion of the FSS’s coverage.
Despite at the same time more employers and employees will start contribute to the fund, the consulting firm noted that such increase is “minimal when comparing to the government funding”.
Hence, the firm forecasted that based on this circumstance, the assets of the FSS will be completely run out in 2036.
Yet, the government is planning to set a standard contribution period at 30 years, that means it should end in 2039 beginning this year.
The report thus suggests the need to increase money injection into the FSS every year in a bid to ensure its assets will only start to run out after 2039.
As such, it is proposed that besides the monthly contributions of 45 patacas and the regular government funding, each beneficiary will be required to contribute extra 33 patacas a month.
If society wishes the social security system to go on operating after 2039, the consulting firm pointed out that “a higher amount of extra contributions will be needed”.
Meanwhile, the report found that if the government increased its funding by one percent every year, the FSS would still need additional 323 million patacas every year in order to maintain its operations until 2039.
On the other hand, if the government funding rose by three percent or above year on year, the FSS would be able to operate for more than three decades even if there was no additional money injection.
The standing committee president said the officials deemed that the SAR government would have the financial capability to meet the suggestions in the report, but only when the public revenues – which largely come from the direct gaming tax – could remain stable in the future.
The next committee meeting will be held on February 3.