Draft law aims to ease financial strain on pensioners after years without rises

TDT | Manama

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Extra oil income would be channelled into Bahrain’s Pension and Social Insurance Fund under a draft law put forward by four MPs, who want to restart annual rises for retirees that stopped in recent years because of a funding gap.

The proposal ties extra support for the fund to higher crude prices.

When the price of a barrel of crude oil climbs above $40, $1 would be taken from the revenue of each barrel.

Once the barrel price reaches $80 or more, the deduction would rise to $2 a barrel.

Income

These sums would go straight to the Pension and Social Insurance Fund to strengthen its income and help close the actuarial deficit.

The draft has been submitted by MPs Khalid Buanaq, Ahmed Al Salloom, Zainab AbdulAmeer and Hesham Al Awadhi.

Its clauses state that the scheme would start from the financial year after the law comes into force.

The Minister of Finance and National Economy would have three months from that date to issue the decisions needed to put the law into effect.

Provisions

The text also requires the Prime Minister and ministers, each in their own area, to apply its provisions once it is published in the Official Gazette.

According to the explanatory memorandum, the aim is to provide an on-going flow of money linked to higher oil prices, rather than rely on irregular transfers.

The extra amounts are intended to reduce the gap between what the fund owes to retirees and what it currently receives.

Buanaq said the proposal is a response to the severe financial pressures facing the Pension and Social Insurance Fund, which led to the halt in the annual rise for retirees.

Direct effect

He pointed out that tens of thousands of retirees depend on their pensions as their main source of income, and that stopping yearly increases has had a direct effect on their standard of living.

He added that putting aside a share of surplus oil income once prices cross an agreed ceiling would give the fund a reasonably reliable stream of cash.

This, he said, would help it meet its obligations to beneficiaries, including bringing back the yearly rises in pensions.

Social justice

The proposal states that directing part of the returns from natural resources towards retirees is in line with social justice and strengthens the role of the state in looking after people who have spent many years working in both the public and private sectors and now rely on the social insurance system in old age.

It also states that the measure would support the wider social insurance framework and help it continue on a sound footing over the long term.