Future of pension funds in spotlight

New pension fund reforms were the focus of a forum yesterday which brought together Shura Council members, MPs and experts.

The Bahrain Centre for Strategic, International and Energy Studies (Derasat) held the virtual forum under the theme “Future of Pension Funds in Bahrain”.

Addressing the event, General Organisation for Social Insurance (Gosi) chief executive Eman Mustafa Al Murbati stressed the importance of ensuring the sustainability of pension funds and meeting financial obligations, including work injuries or dangers to which the employee is exposed.

She underlined the necessity of maintaining a balance between the revenues, which consist of subscriptions or contributions, on the one hand, and expenses represented in the pensions, on the other, to ensure the sustainability of funds.

She pointed to the ever-growing pressure on funds due to the increasing numbers of retirees, while the number of subscribers remains stable, thus creating an imbalance.

An actuary study conducted in 2018 warned that the public pension fund would dry up by 2024 and the assets of the private sector pension fund could be exhausted in 2033.

Citing alarming figures, she said that the pension funds deficit had almost doubled in five years, jumping from BD7.5 billion in 2015 to BD14bn in 2020.

“The actuary warned that maintaining the status quo of pension funds without making radical reforms would make it difficult to pay pension benefits,” she said, urging the expert reforms to be fast-tracked.

The Gosi management endorsed 10 pressing recommendations from the actuary study, which must be implemented in a single package.

The Gosi chief stressed the need for BD11 billion to be able to prolong the life of pension funds by 50 years – that is until 2086.

The actuary recommended an urgent merger of pension funds, freezing the annual pension rise unless there is a surplus, in addition to decoupling salaries and pensions and putting a ban on combining pension salaries.

The first package of pension fund reforms were announced last Monday.

The remaining six reforms are as follows:

1. Reducing the pension by six per cent for each year of retirement before the normal retirement age.

2. Considering the normal retirement age of 60 years and optional 65 years, with the possibility to continue working after that cap.

3. The pension adjustment is based on the average salary of the last five years before retirement.

4. Increasing the percentage of insurance contributions 1pc gradually until it reaches 27pc, as of this year.

5. Setting a minimum retirement age of 55 years and abolishing legal service years.

6. Unifying the benefits of pension funds, through unifying contributions/subscriptions at 27pc.

 

Source: http://www.gdnonline.com/Details/837694/Future-of-pension-funds-in-spotlight

 

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