Strategic pension reforms rethink

SIX new urgent reforms that require legislators’ consent have been presented by the government in a bid to prolong the life span of funds under the Social Insurance Organisation (SIO).

The details, as well as further suggestions, were presented during an urgent meeting held remotely yesterday between MPs and Shura Council members, led by National Assembly and Parliament chairwoman Fouzia Zainal and ministers headed by Finance and National Economy Minister and SIO board chairman Shaikh Salman bin Khalifa Al Khalifa.

“Action is necessary to protect the government pension fund from bankruptcy by 2024 and the private pension fund by 2033,” Shura Council financial and economic affairs committee chairman Khalid Al Maskati told the GDN following the meeting.

“Four are needed now and six have been referred to us for review and need to come through normal legislative procedures, but they remain urgent.

“The fate of 95,000 Bahraini pensioners and 140,000 Bahraini workers lies in our hands should reforms not be agreed with the deficit reaching BD14.38 billion in the public sector alone, despite revenues from investments over the past six years reaching BD1.63bn, with 54 per cent growth.”

With the long-term future the focus of attention, these additional six suggestions are expected to increase the life span of the funds as far ahead as 2086.

This could be achieved, the meeting heard, by

• Reducing wages by 6pc for every worked year before determining a pension through a detailed calculation
• Setting the retirement age at 60 and voluntarily up to 65, although it would be possible to allow work beyond these years
• Calculating the pension on an average of the last five worked years
• Increasing monthly contributions gradually by 1pc from 2020 to reach 2.7pc
• Setting a minimum retirement age at 50
• Cancelling ‘giveaway’ years.

The move comes on top of four emergency reforms approved by His Majesty King Hamad earlier yesterday through a royal decree to prolong the funds’ life span until 2030.

They include unifying pension funds for private and government workers, giving only one pension without multiple pensions being considered, a stop to all annual increases to pensions, except for particular cases when there is a surplus, and, existing pensioners who don’t fall into normal categories – such as ministers, MPs, Shura Council members and municipal councillors – would not receive any additional pension for taking up new appointments or elected posts.

Even more changes may be on the way as a further six suggested reforms have been floated for future consideration.

They are:

• Retirement considered after 20 years of work
• Having a minimum on monthly contributions to ensure benefits are not much more
• Redefining criteria for buying virtual years and adding previous years of service
• Allowing additional contributions from government employees as allowed in the private sector
• Changing payments to those who retire without fulfilling minimum pension requirements
• Introducing pension contributions and compensations for incapability, disability and death.

The pension debate will continue.

Source: http://www.gdnonline.com/Details/837609/Strategic-pension-reforms-rethink