Macau Central Provident Fund

Macau Central Provident Fund Scheme for the private sector.

Seeking to strengthen the social security scheme in the Macau SAR and its existing provident fund scheme, the Social Security Fund (SSF) ran a detailed study and a public inquiry on the peoples’ thoughts and remarks regarding the creation of a central provident fund. 

Thereafter, the Macau SAR Government submitted a proposal to the Legislative Assembly for the implementation of the said new central provident fund scheme, based on the modus operandi of the private pension schemes.

The law was subsequently approved with the clear objective of ensuring a sustainable retirement plan for Macau residents, based on the contributions of both employers and employees (or individuals if that is the case), as well as from the Macau SAR Government. In this regard, it is worth noting that given its non-mandatory nature, the law includes incentives to the employer such as tax benefits.

Simply put, the new law, published in the Macau Official Gazette on 19 June 2017, defines participation in a non-mandatory central provident fund scheme, providing that access to the same can either derive from an agreement between the employer and its respective employee or through a voluntary individual application.

Within this legal framework, there are two main functioning schemes: (a) the contributive regime, implemented through voluntary participation under provident fund plans, and (b) the distributive regime, which is implemented through the transfer of funds from the Macau SAR’s public purse to its residents.

As specified in the law, the main purposes of the non-mandatory central provident fund scheme are (i) the reinforcement of the social protection of the Macau SAR residents in old age, and (ii) complementing the existing social security scheme.

It is stated that the SFF will be the entity responsible for executing the law, namely establishing and supervising the non-mandatory central provident fund, namely ensuring the automatic opening of individual accounts for every Macau resident over 18 years old (although it can also include younger residents if the same are enrolled on the Social Security scheme), which is composed by three subaccounts: government contributions, general contributions, and maintenance.

With respect to the individual account holders of the non-mandatory central provident fund scheme, the law states that they can only access the funds when reaching 65 years of age or prior if under certain circumstances such as serious illness or when faced with substantial medical expenses. The scheme is considerably flexible in the sense that it is not susceptible to being canceled merely on the grounds of the termination of employment.

Meanwhile, the government contributions subaccount is managed by the SFF, whereas the general contributions and maintenance subaccounts are managed by the management entities of the respective pension funds from which they originate.

To ensure proper and adequate enforcement of the provisions, the law also encompasses a sanctions framework, including administrative sanctions, but also criminal liability in the more serious cases.

The new law comes into force on 1 January 2018.

As usual, we are fully available to elaborate on the particular features of the law, namely the advantages and obligations for employers when applying for this non-mandatory central provident fund scheme. In our humble opinion, it is an option worth considering.

Macau Central Provident Fund