Slow pension day

The government expects the new non-mandatory provident fund presented last week could convince at least 100,000 residents to change from private pension employment schemes to the new system in the three years of its experimental period. When questioned as to why the new contribution scheme won’t be mandatory in its first phase, the President of the Administrative Committee of the Social Security Fund (FSS), Iong Kong Io, stated in a press conference held yesterday that due to “Macau’s current economic readjustment”, enforcing a new contribution model could “highly pressure” local SME’s struggling in the current economic climate. Last week, the Executive Council presented a new non-mandatory provident fund system, where companies and employers will be awarded fiscal benefits if they agree to contribute, in cooperation with their employees, a minimum of 10 per cent of the salary amount to an individual’s retirement fund. “The contributions made by employers for the joint fund will be considered as exploration costs, with this value doubling if the employer maintains their contributions for the three years after the law is approved,” the Head of Social Security Department, Ieong Iun Lai stated in the press conference. The FSS President reiterated that he believes the proposed fiscal benefits, together with the attractiveness a company will gain in the eyes of future employees if the company adheres to this scheme, will convince employers to adopt the proposed contribution scheme. “At the moment 40 per cent of employees in the private sector, around 110,000 workers, are in private pension plans, and we believe 100,000 workers will change from private pension plans to the new central system,” said Iong Kong Io. The FSS also stated “the average return on private pension funds between 2009 and 2014 was around 3.88 per cent,” arguing that this is one of the factors that will convince employers to change to the new pension system. Still no plan for part-time workers When questioned if the proposed contribution plan will include part-time workers, the FSS President said “after the proposed system is implemented, we will try to create a specific plan for part-time employees”. The FSS stated that after some “slight changes”, the proposal was ready to be sent to the Legislative Assembly (AL), in order to discuss its possible future mandatory application and the contribution reversal after contract termination. One of the aspects proposed in the non-mandatory provident fund is the “portability” of the amount, with workers able to keep the contribution account active after their work contract is terminated. In the case of termination of a work contract, if an employee has completed three years of contributions, they would be entitled to 30 per cent of the employer’s contribution amount, receiving an added 10 per cent for every year of work, and would be able to receive 100 per cent of the employer’s amount after a 10-year period is completed, the FSS explained. Cash out in special cases The proposed fund could only be liquidated after a resident reaches 65 years of age, but when questioned if that amount would be accessible in any cases before that age, the FSS President stated that “as a protection for workers after retirement, the amount won’t be able to be liquidated before that age, but if after 60 the person doesn’t want to work more, they can fill out a requirement to be evaluated by the FSS. Also, in cases of medical emergency, when a resident might really need the fund, the person will also be able to require its liquidation.” Currently, contributions to FSS are made at a 2:1 ratio, with employers and workers paying MOP30 and MOP15 monthly, with a proposed increase this year to MOP60 and MOP30 respectively. The new non-mandatory fund would complement the Provident Individual Account for permanent residents introduced in October 2012, where an Incentive Basic Fund single payment of MOP10,000 is added together with a special allocation (currently MOP7000) from the budget surplus, for withdrawal after the age of 65, according to the FSS.