Macau Pension Fund Essay

According to the Act 84/89/M, Social Security inventory would provide subsidies or assistance for unemployed, sick and retired people. This was the so-c either the starting signal tier of social security. At the same time, SSF was positioned as a monetaryly independent gillyf inflict under the topical anaesthetic government. In Macau, Pension fund is included in the SSF, and there is no separation between the management of pension fund and SSF.Instead, pension fund is considered as an expense from the aspect of financial management. All the working people, including non- fixed and permanent residents, are required to contribute to SSF in each month. If they have contributed plenty amounts, they can get part of or all(prenominal) the pension fund payment after hideaway. Since 1993, the government was gradually enlarging the coverage of pension fund beneficiary. So far, most unemployed or workless people, such as housewife, could join the voluntary contributions program.After c ertain periods of contribution, those people are also entitled to the pension fund payment from SSF once they are over 60. 2. 0 Current Problems As a financially independent fund, SSF is supposed to maintain the operation with the contribution as its major income. However, government funding has already set out the most important income of SSF in recent age. In 2010, government budget and funding from gaming tax accounted for 92% of the total income of SSF (see figure 1).For the pension fund, umpteen people stated that the pension fund payment, maximum finish off 2,000, is not enough under the high-inflation economy. Some academies also claim that the contribution is not enough to maintain the budget equipoise of SSF. After all, government announced the predictable deficit of SSF since 2014 and bankruptcy in 2020 without government funding, which cause the heated discussion in Macau. 3. 1 Insufficient Contribution According to the SSF regulation, a resident who have contributed to SSF for 30 years is qualified to get MOP 2,000 per month after retirement at 65.Actually the monthly contribution to SSF has been fixed at MOP 45 per person since 1998, which means the total contribution in 30 years would be arrested in 9 months after retirement. Figure 1 Income of SSF in 2010 The contribution in 2010 only accounted for 5. 35% of the annual income of SSF and 24. 4% of the pension fund payment. In other words, the contribution is obviously insufficient to support the pension fund payment. The pension fund payment has been increased from MOP 800 in 1995 to MOP 2,000 recently, so as other subsidies and assistances.Therefore, the government kept increasing funding for SSF to prepare for the increasing outcome. Millions (MOP) Figure 3 Social security expenditures by SSF 3. 2 Insufficient Pension Fund Payment According to the poverty line set up by Economic Cooperation and Development (OECD), the people with an income level lower than half of median income should be considered as poor people. Referring to 2011 median income published by Macau Statistics and Census Service, people have income lower than MOP 5,000 per month should be classified as needy.However, the maximum amount of pension fund payment is MOP 2,000, only 40% of the poverty line. The payment is even lower than the marginal subsistence index for one-person family, which is MOP 3,000 after the adjustment by Macau government on 1 Apr 2012. In view of this, some communities and organizations have called for further acclivity of pension fund payment. 3. 3 Inefficient Management Rate of Return Percentage Inflation Rate Figure 2 Investment return of SSF balance and Macau inflation rate Given the enlarging funding from government, the balance of SSF have increased from MOP 1. 5 billion in 2006 to MOP 6. 2 billion in 2010.However, it has been shown in Figure 2 that the investments return of SSF balance is just a bit higher than the inflation. During the financial crisis, there was even a negative return recorded in 2008. By ignoring year 2008, there is still a downward trend of the return. According to the 2010 annual report of SSF, 72. 43% of SSF balance was deposited into local bank, the remaining proportion was entrusted to fund managing company for only low-risk investments. Under the fix-rate hedging between MOP and HKD, the interest rate of Macau is close to interest rate in Hong Kong, which is similar to US interest rate.Since the 2008 financial crisis, Fed has applied the ultra low interest rate and the interest rate is believed to be maintained until 2014. So, a 72. 43% of deposit in an investment portfolio is reasonably considered as inefficient. 3. 4 Irregular government subsidies In 2008 Macau government introduced the Wealth Partaking Scheme. Each permanent resident will receive the cash check issue by government and each non-permanent residents would received 60% of the partaking amount to permanent resident. The aim of the synopsis is to share the result of economic development under the high-inflation economy.However, in some peoples view, the scheme has been considered as supplement of social security and thereof expected to transfer the scheme into regular subsidies. Beside the partaking scheme, Macau government established the Central Saving Plan to inject certain capital into individual account of all the permanent attained the age of 22 in the year. The government claimed that the plan is the second tier of social security and the plan will enhance the animateness security of retired people. Under the government regulation, people could withdraw the saving fund only when they are over 65 or in urgent needs.