Research of the income replacement ratio of Provident Fund Scheme in Macau

This study mainly uses asset/salary ratio model to assess the financial planning of Provident Fund Scheme in Macau based on assumptions of growth rate of salary, inflation rate, return on investment, tolerant risk, exchange rate risk, length of working, and length of retirement life under the current economic perspectives. The main findings show that the age of 36 can attain the income replacement ratio at 30%; the age of 44 at 50%; the age of 54 at 70% given the first year of working is age of 25. In addition, this study also proposes that the Fundo de Pensoes de Macau should select the types of global stocks mutual funds prudentially and also should educate the public servants to use asset/salary ratio as a measure to assess whether it can achieve the target income replacement ratio and to balance the portfolio.