MPs restore 3% pension rise

TDT | Manama

Email : editor@newsofbahrain.com

Parliament yesterday approved a bill to amend the Social Insurance Law of 1976, restoring annual pension rises on a graduated scale and shortening the averaging period for pension calculations to the last two years of pay.

The amendments also include cutting employees’ contribution rates from seven to six per cent and allowing working women to retire at 55 instead of 60.

The bill brings back yearly rises for all pensions across five bands, from five per cent for pensions of BD500 and under down to one per cent for pensions above BD4,000.

It also recasts how both the pension and the lump-sum indemnity are calculated so that each is based on the average of the last two years of contributions.

Further clauses keep the employer’s share at 12 per cent and retain the cap that any supplementary pension converted from an indemnity cannot lift the total above 90 per cent of the averaged wage.

Pause

The government urged a pause for a new actuarial study, warning that lowering contributions, shortening the averaging period and reintroducing annual increases without identified funding could strain the scheme and the general budget.

They cited an actuarial gap of BD14.4 billion and said differing retirement ages would unwind recent equal treatment between men and women.

The Social Insurance Organisation (SIO) told MPs the annual rise had been deferred, not cancelled, for want of a surplus.

Increase

It put the cost of a three per cent increase at about BD22 million a year for roughly 108,000 retirees whose combined pensions total BD737 million, and said paying one year of increases would cost around BD26 million.

Speaking for the SIO yesterday, chief executive Sahar Al Manai said the authority’s financial statements are posted on its website and that the 2022 reforms followed detailed actuarial and financial studies showing the funds would face major strain under the previous rules.

change

She said any major change now would affect future liabilities and that the 2022 framework should be given time to bed in before its benefits are judged, adding that the SIO reviews fund performance regularly and stands ready to study parliamentary proposals that are grounded in up-to-date actuarial data.

Backing the bill, MP Hassan Ibrahim said fairness required restoring the annual rise while keeping the funds sound through a clear actuarial study.

He urged reprioritising public spending to free BD22 million a year for a three per cent rise to protect retirees’ purchasing power.

“Retirees, doctors, lawyers, teachers, soldiers, mothers and fathers, gave this country their years,” he said. “We should return the favour with a decent, steady life by reinstating the yearly increase, while making sure it is sustainable.”

He supported the clause cutting the insured person’s contribution to six per cent with employers at twelve and asked the committee to publish a full financial model on fund longevity and investment returns. MP Mohammed Al Ahmed also backed the bill but pressed for a funding route, saying the chamber’s economic adviser had recommended redirecting the Unemployment Insurance surplus to the pension funds until they regain balance.

He said he had hoped for closer coordination with the Government and the Shura Council on restoring the three per cent yearly rise, describing the measure as a shared demand among retirees and one supported by all MPs.

MP Jalal Kadhem urged an urgent plan to reinstate the three per cent annual rise and steady the pension funds, proposing a BD200 million one-off transfer from the Unemployment Insurance Fund and better use of fund land and other assets.

Halt

He said thousands had been hurt by the halt to the yearly rise and that many retirees on BD350–500 pensions were struggling with living costs.

Kadhem criticised what he described as weak investment and management practice at the funds and called for a restructure to include civil-society and private-sector experts, with the Finance Ministry exercising direct oversight.

He added that the 2022 move to stop the rise came from the Government and passed the previous Parliament, and pressed for closer scrutiny of future Government bills that affect pensions.