The Social Security Fund (FSS) announced in a statement yesterday that it will lower its activation threshold for the periodic adjustment of social security benefits, reducing the required cumulative change in Macau’s composite consumer price index (CPI) from the current three per cent to two per cent.
Yesterday, the FSS presented its plan to optimise the “Periodic Adjustment Mechanism for Social Security Benefits” to the government-appointed Standing Council on Social Concerted Action. According to the statement, the proposal also establishes a flexible procedure to ensure that old-age pension adjustments occur at intervals of no more than three years.
The old-age pension currently stands at 3,900 patacas per month.
In addition to the old-age pension, various FSS social security benefits include disability pensions, unemployment allowances, and sickness allowances, among others.
The FSS stated that these optimisations will enhance the mechanism’s responsiveness to price fluctuations, thereby ensuring that adjustments to old-age pensions and other benefits are more closely aligned with the needs of the population.
The proposed plan is based on a specialised study commissioned by the Social Security Fund from the University of Macau (UM) last year, titled “Feasibility Study on Linking the Old-Age Pension Adjustment Mechanism with the Minimum Subsistence Index”.
According to the statement, the UM study report noted that the composite CPI is a sufficiently representative, reasonable, and reliable indicator of purchasing power changes across society, including among the elderly.
The study report concluded that it is therefore appropriate to continue using the composite CPI as the core parameter.
To enhance responsiveness to price fluctuations, the UM study recommended lowering the activation threshold from a cumulative three per cent change to two per cent, taking into account Macau’s average inflation trends in recent years. Furthermore, to avoid the stagnation of adjustments during periods of prolonged mild inflation, the report recommended setting a target for old-age pension adjustments at intervals of no more than three years, supported by a flexible procedure.
Under this procedure, if the cumulative change in the composite CPI does not reach the two per cent threshold within three years of the last adjustment, the Social Security Fund may still consider the actual socio-economic situation, residents’ expectations, and the fund’s financial capacity to assess whether an adjustment is warranted.
Economists regard the composite CPI as a key economic indicator measuring the average change over time in prices paid for a representative basket of consumer goods and services, covering households across the population.
The statement noted that the Social Security Fund will closely monitor price changes and social developments while adhering to the principle that the old-age pension, together with the government’s annual subsidy for senior citizens (currently 10,000 patacas per year), shall not fall below Macau’s official minimum subsistence index, thereby guaranteeing a basic level of protection for the elderly.
The statement underlined that once the conditions set by the new adjustment mechanism are met, the Social Security Fund will prepare proposals, seek the views of the Standing Council on Social Concerted Action, which comprises government, employer and employee representatives, and submit formal recommendations to adjust its various social security benefits.
This chart provided by the Social Security Fund (FSS) yesterday shows its plan to lower the government’s Social Security Benefits Periodic Adjustment Mechanism activation threshold.
