Gov’t projects MOP9 billion cumulative deficit through 2031

[Photo: Renato Marques]

The government projects that the local pension system’s cumulative funding shortfall will reach MOP8.986 billion between 2027 and 2031.

The forecast was addressed yesterday at a meeting of the Legislative Assembly First Standing Committee, which continued reviewing the details of the bill related to the “Consolidation of the Financial Resources of the Pension Fund.”

The meeting, which was attended by the Secretary for Administration and Justice, Wong Sio Chak, heard that at the end of June, the fund had some 6,465 participating members, with an average age of 51.9 years and an average of 26.4 years of service.

By the end of June, a total of 6,577 recurring benefit payments had been issued, including 6,056 retirement pensions and 521 survivor’s pensions. The total figure represents an increase of 390 payments compared with the same period (1H) last year.

A forecast shared by the government showed that, by the end of 2030, the number of active members is expected to fall to about half, to 3,290, while the number of recurring benefit payments is projected to rise to 9,150, contributing to the projected MOP9 billion cumulative deficit.

After the meeting, Committee President Wong Kit Cheng said government representatives had explained that the Pension Fund’s current sources of funding mainly consist of transfers from the government’s annual budget, allocations from gaming revenue-sharing arrangements, returns on financial investments, and member contributions.

To consolidate the fund’s financial balance, the bill under discussion proposes establishing a funding mechanism to be calculated at the end of each fiscal year. The final amount to be transferred into the fund would be calculated by applying a percentage set by an executive order from the Chief Executive, drawn from the government’s general account budget surplus.

While generally agreeing with the idea of increasing the fund’s revenue, Committee members have expressed concerns about whether these allocations would affect spending on existing public welfare programs that are also financed by the budget surplus.

Wong Kit Cheng said the government explained that, under the proposed procedure, the Pension Fund would submit information on its funding deficit at the end of each year.

The information would then be assessed by the Financial Services Bureau and analyzed according to the overall economic situation and budget surplus before a recommendation is made to the Chief Executive on the percentage to be allocated each year.

She noted that the proposed system would not involve a fixed percentage but rather a flexible mechanism. Similar to the government’s annual cash handout program of MOP7,000 for residents, the funding injection would be linked to the budget surplus. In years without a surplus, the transfer would also be suspended, as occurred during the COVID-19 pandemic.