Balancing the pension scales

The MSAR Government has proposed the introduction of a law for a non-mandatory provident fund, in which employers will be awarded fiscal benefits if they accept to contribute, in cooperation with their employer, a minimum of 10 per cent of their salary to an individual retirement fund, the Executive Council announced yesterday.
“We took in to account provident models in other countries and the public consultation and we believe the system is fair for both parties,” said Administrative Committee of the Social Security Fund (FSS), Iong Kong Io, adding that the new model wouldn’t replace the current Provident Fund but complement it.
Currently, contributions to FSS are measured at a 2:1 ratio, with employers and workers paying MOP30 and MOP15 monthly, and a proposed increase this year to MOP60 and MOP30 respectively. In October 2012, the government introduced a Provident Individual Account for permanent residents, where an Incentive basic fund single payment of MOP10,000 is added together with a special allocation from the budget surplus, currently MOP7000, for withdrawal after the age of 65, according to the FSS.
In March, a report by financial advisory company Willis Towers Watson for the Social Security Fund, suggested the fund should consider ‘a gradual increase in the amount of contributions up to a set goal, maybe creating a plan for the next years,’ since government funds and gaming revenue comprise 92 per cent of the old age pension funds, while employers and workers’ contributions total only 8 per cent, predicting that future falling gaming revenue and active population decrease would cause strains on the social system in Macau.
Reshuffling the board
The proposed non-mandatory provident fund expects that the contributions would be negotiated between the employer and worker, with a minimum contribution of 5 per cent each, for a fund that is ‘portable, and without possibility for liquidation and cancelation in case of contract termination’. If positive results were observed by a FSS report in three years, it could become mandatory, according to the Executive Council spokesperson Leong Heng Teng.
The proposed law divides the individual contribution account into three accounts: the Government management account; the contribution account; and the conservation account, with the latter receiving an amount agreed to by the employer and worker, taking into account salary levels. In cases where an employee’s salary amount is less than MOP6240, after the worker pays their 5 per cent amount, they would be exempt from making further contributions, but the employer would have to continue contributing.
Also, in cases of contract termination, if the employee completed three years of contributions, they would be entitled to 30 per cent of the employer’s contributions, receiving an added 10 per cent until a 10-year period is completed, at which time they would receive the whole amount of the employer’s contributions.
“We want to provide guarantees for workers’ retirements, but this amount won’t be used to pay contract termination indemnities, the FSS director stated. Ion also mentioned that currently “40 per cent of companies in Macau already have private pension plans,” and these agreements wouldn’t be changed if they are more favourable to the workers when compared to the proposed contributions, stating “the employer can’t reduce the contribution. If it’s 8 per cent of the salary it stays at 8 per cent.”
Residents with no work contracts would also be able to contribute to the account with a minimum monthly payment of MOP500.
Kind but not enough
Mr. Iong added he believes the fiscal benefits and social responsibility reputation of companies, will be enough to convince employers to adopt this measure. He noted that the proposed law will only be allowed as long as employers don’t reduce their contributions and employees don’t see their part increased.
“We believe it is a guarantee of benefits for the worker in their employment situation, and we want to create better work conditions. When an employer joins the non-mandatory regime it shows that they respect the measures and can attract employees” he stated to the press.
The FSS explained that companies who accept the non-mandatory contributions scheme would be able to declare their contributions as exploration or activity costs, with this value doubling if the employer maintains their contributions for three years.
“According to World Bank’s multi-pillar pension system, income saving accounts (either compulsory or voluntary) and public pensions play different roles in the multi-pillar pension system. The Macao SAR government wants to increase the contribution of employers and employees to ensure the sustainability of the public pension.
“On the other hand, income saving accounts can be counted as additional benefits on top of the basic pension benefits for older adults.
Therefore, we can see that the arrangements will lead to the benefit amount related to their income, rather than the basic living standard,” said Chan Kin Sun, Assistant Professor at the Department of Government and Public Administration.
Legislator José Pereira Coutinho believes employers’ contributions should be increased, since the economic contraction will diminish the amount of money awarded by the government to the FSS.
“We have elderly people receiving a misery of MOP2,000 and MOP3,000 in pension, and this situation will have to change, since the golden times won’t last forever and when the gambling revenues go down, the FSS will end up bankrupt. It’s time to increase the contributions by the employers, and for that, more popular representation through direct elections is needed,” said the President of the pro-democratic New Hope party and a directly-elected legislator.

Changes in the hiring process
The Executive Council has also announced a new optimised and specialised public recruitment process. The Head of the Public Administration and Civil Service Bureau (SAFP) Kou Peng Kuan, announced four major alterations would be made to the hiring process.
The central recruitment process will be divided in to two levels: a first one every six months where the SAFP evaluates the general competencies and skills of the candidates; and a second level where approved candidates will be put on a list valid for three years, during which time they can apply for job openings in the respective services and departments, being evaluated by those departments in collaboration with the SAFP.
An electronic application platform will also be provided and applicants will be able to complement their formation hours, of which 60 or 100 per cent have to be directly related to the functions they are applying for, with secondary formation, less related to the employment position.
Management and director positions will be exempt from public applications, and will be nominated by a service commission. This exemption is applicable to members of the Chief Executive cabinet and other government administrative services. It was proposed that the current regulations be applied 30 days after the ruling publication.