Macau Pension Fund Essay Example for Free

Macau Pension Fund EssayAccording to the exploit 84/89/M, Social Security farm animal would provide subsidies or assistance for unemployed, sick and retired people. This was the so-c any the startle tier of social security. At the same time, SSF was positioned as a fiscally main(a) livestock under the local disposal. In Macau, Pension storage is included in the SSF, and in that location is no insulation between the management of pension investment trust and SSF.Instead, pension fund is considered as an expense from the aspect of financial management. All the working people, including non-permanent and permanent residents, are required to contribute to SSF in each month. If they have contributed teeming amounts, they can get part of or all the pension fund payment after retirement. Since 1993, the establishment was gradually enlarging the coverage of pension fund beneficiary. So far, most unemployed or workless people, such as housewife, could join the voluntary co ntributions program.After certain 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 stimulate the most important income of SSF in recent years. In 2010, government budget and funding from gaming tax revenue accounted for 92% of the total income of SSF (see figure 1).For the pension fund, many people stated that the pension fund payment, maximal MOP 2,000, is not comme il faut under the high-inflation economy. Some academies also claim that the contribution is not enough to maintain the budget equalizer 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 regulat ion, 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 representation the total contribution in 30 years would be returned in 9 months after retirement. body-build 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 unbroken 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 i ncome level lower than half of median income should be considered as misfortunate 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 minimum subsistence index for one-person family, which is MOP 3,000 after the alteration by Macau government on 1 Apr 2012. In view of this, some communities and organizations have called for further sharpen of pension fund payment. 3. 3 Inefficient Management appraise 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 high er 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 absorb rate of Macau is close to interest rate in Hong Kong, which is similar to US interest rate.Since the 2008 financial crisis, ply 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 hold back issue by government and each non-permanent residents would received 60% of the partaking amount to permanent resident. The aim of the turning away 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 thus 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 living security of retired people. Under the government regulation, people could back off the saving fund only when they are over 65 or in urgent needs.