Isolda Brasil*
Aiming to complement the existing social security regime and to offer more protection to the elderly in the MSAR, Law 7/2017 on the Non-Mandatory Central Pension Scheme was approved in June, but will only come into effect on January 1, 2018.
Though the ground rules of the new regime are laid down in the new regulation, Law 7/2017 is supposed to be further regulated by other complementary diplomas, which are still yet to come. Regardless, even without the particulars that the complementary diplomas are supposed to add, it seems clear that this new regime offers Macau’s residents a way to plan their retirement and to look into old age with more confidence.
The first aspect of the terms that stands out in this new law is the fact that it only applies to permanent residents of Macau (regardless of the type of employment contract they have) who are older than 18 years or permanent residents who are not older than 18 years, but are already registered for the Social Security Fund. Non-permanent Macau residents and blue card holders are, therefore, excluded from this new regime.
Another important aspect of this new regime is the fact that it is not mandatory, so individuals and employers only adhere to it if they choose to. This allows for contributions to be made on an individual or joint basis, which means that if the employer decides not to join the employees, who qualify for the conditions, they can still do it on their own. Also, if the employer constitutes a joint contribution plan, the employees are free to join it.
The good news for employers who already have private pension schemes in place is that the new joint pension plans can be articulated with private pension funds. This means that an employer who previously constituted a private pension fund can constitute a joint pension fund and maintain both in force simultaneously or cancel the private pension fund without prejudice to its employees.
When it comes to the value of the contributions, the law establishes that contributions will be 5 percent of the employee’s base salary (5 percent deducted from the employee and 5 percent deducted from the employer). However, if after the deduction of the contribution the employee’s salary is less than MOP 6,240, the employee (but not the employer) is exempted from making its contribution. If the base salary of the employee is more than MOP31,200, both employer and employee are not required to contribute more than MOP1,560 per month each. Regardless, the employer and the employee can agree on a higher contribution rate or contribute above the MOP31,200 threshold set in the law.
One aspect that stands out in the new regime, though frequently seen in private pension fund policies, is that contributions made by the employers to joint pension funds only revert to the employees upon termination of the work relationship if the employees stay with the company for more than three years. In fact, the reversion rates of the contributions made by the employers increase in accordance with the seniority of the employee, which means that workers who stay longer with a company get higher benefits upon leaving their jobs.
So, in practical terms, the implementation of these plans might be the right tool to help Macau’s employers with the retention of local talent, as employees might feel compelled to stay longer in their jobs in light of these benefits, which are lost if they change jobs frequently.
*Senior Associate, MdME
No Comments