The government announced yesterday that it will allocate 80 percent of its 2025 financial surplus to the Pension Fund (FP) next year in order to expand the scale of its assets used for earning investment returns, with the aim of consolidating the long-term financial foundation for the government’s pension and survivor benefit scheme for public servants -operated and managed by the fund.
According to a new law enacted in August this year, the government can allocate a certain percentage of its financial surplus generated in the previous year to the Pension Fund, provided that the statutorily required amount of the government’s basic reserves is met, with the aim of ensuring the financial sustainability of its pension and survivor benefit scheme for public servants. The government can decide whether to make an allocation to the fund each year on a case-by-case basis, depending on its financial surplus generated in the previous year.
The government’s fiscal reserves consist of basic reserves and extraordinary reserves.
After consulting the Financial Services Bureau (DSF), the chief executive will determine the allocation percentage - listed in an executive order published in the Official Gazette (BO), according to the new law.
The 80 percent allocation was announced in an executive order gazetted yesterday – signed by Chief Executive Sam Hou Fai on Thursday last week.
According to yesterday’s order, the government will allocate 80 percent of its 2025 financial surplus to the 2027 budgeted revenues for the Pension Fund.
The Government Information Bureau (GCS) issued a statement yesterday to elaborate on the government’s decision to make the 80 percent allocation.
The statement noted that the government is statutorily required to assume the payment of retirement pensions and survivor benefits to public servants who subscribe to the scheme. However, the accumulated deficit of the Pension Fund is expected to reach 8.986 billion patacas over the next five years, and in the next 10 years, the deficit is expected to increase even further. Therefore, it is extremely necessary to carry out forward-looking planning and allocation of financial resources for the scheme, the statement underlined.
According to the statement, the government recorded a financial surplus of 19.89 billion patacas last year. Consequently, the relatively abundant and robust budget execution surplus provides favourable conditions to make advance arrangements regarding the future need for a large volume of financial resources for the fund’s pension and survivor benefit scheme, the statement said.
Therefore, in accordance with the new law enacted in August, the government decided to make an 80 percent allocation to the Pension Fund – equivalent to 15.91 billion patacas – aiming to meet the fund’s legal payment obligations, the statement said.
The statement underlined that the allocation will allow the fund to expand its assets and investment scale, extending the investment cycle. Through long-term investment and capital accumulation via compound interest, potential revenues and financial resilience can be increased, creating a more consolidated long-term financial foundation for its pension and survivor benefit scheme, the statement said.
The statement underlined that the 80 percent allocation will not affect the government’s expenditure on various measures aimed at public welfare and social benefits, nor will it affect the statutory allocation to the basic reserves.
The statement underlined that if the potential deficit situation for the Pension Fund is not resolved in a timely manner, future expenditure and injections into social benefits for residents could even be affected due to the fulfilment of statutory payment responsibilities for the fund.
The Pension Fund will cautiously evaluate its investment strategies, with the support of professional investment advisers, to seek reasonable returns under the principle of stable investment, the statement said.
This undated photo taken from the website of the Pension Fund (FP) yesterday shows the entrance to its office, on the ground floor of the government office building near Golden Lotus Square in Zape. The fund is housed on the ground to third floors of the building.
