Parliament to Discuss New Pension Law Amendments

The Council of Representatives is set to debate a new parliamentary bill proposing several amendments to Bahrain’s pension law. The draft legislation seeks to reinstate the annual pension increase for retirees, reduce employee contribution rates from 7% to 6%, lower the retirement age for women from 60 to 55 years, and calculate pension benefits based on the average salary of the last two years of service instead of five.

The General Organization for Social Insurance (GOSI) has voiced reservations about the proposed amendments, warning that they could place significant financial strain on pension funds. According to GOSI, the proposed annual increase would cost around BD26 million per year, while reinstating the suspended 3% increment would require an additional BD22 million annually. The authority explained that the suspension of increases was due to insufficient funding and that any resumption would depend on the availability of budget surpluses.

GOSI further reported that Bahrain currently has 108,000 retirees, receiving a total of BD737 million in annual pension payments. It cautioned that reducing contribution rates to 6% could negatively impact the government’s fiscal balance program and the national budget, adding more pressure on the already limited financial resources of the pension funds.

The government also expressed concern that the proposed amendments would introduce substantial financial obligations without identifying clear funding sources, potentially affecting both the state budget and the Fiscal Balance Programme. It noted that lowering contribution rates and increasing state commitments could worsen the financial and actuarial deficits of the pension funds. Recent studies indicate that the actuarial deficit stands at approximately BD14.4 billion. The government stressed the need for caution before enacting any changes that could undermine the long-term sustainability of the national pension system.

Meanwhile, the Military Pension Fund stated that changes to contribution rates would not directly impact the current actuarial deficit. However, reinstating the annual increase for military retirees would result in an additional actuarial cost estimated at BD2.27 billion — a move that could weaken the fund’s financial position and accelerate its path toward insolvency without alternative funding. The fund noted that suspending the annual increase in 2020 had extended its solvency by nine years, warning that the new amendments could reintroduce the same financial risks if revenue and expenditure remain unbalanced.

Regarding the proposed reduction of the women’s retirement age to 55, the Supreme Council for Women expressed its reservations, stating that the change could adversely affect women’s participation in leadership roles and contradict the principle of equality enshrined in the 2022 constitutional amendments.