National pension scheme comes under fire from MPs
BAHRAIN’s national pension scheme has come under fire from MPs, following a 14-month parliamentary inquiry.
One senior MP accused pension authorities of failing to properly invest the BD1.3 billion in funds they manage, which average returns of 1.5pc.
Parliament’s financial and economic affairs committee chairman Abdulrahman Buali accused the Pension Fund Authority (PFA) of failing to maximise returns.
“The PFA continues to go for low-return investments,” he said as the issue was debated yesterday.
“To prevent further drainage of the pension fund we can bring banks willing to take money from the PFA, which will sign agreements for 6pc annual profits – rather than the current 1.5pc.
“The current policies are unacceptable and reflect a lack of vision.”
However, Finance Minister and PFA chairman Shaikh Ahmed bin Mohammed Al Khalifa hit back by pointing out that BD65m every year was funding the pensions of former MPs, Shura Council members and municipal councillors.
He said that figure was included in the BD133m owed to the pension fund by the government, adding that banks promising higher returns were also the ones pursuing riskier investments.
“I came here with the impression that MPs would have a solution to the BD65m problem, but that wasn’t the case,” he said.
“Banks giving lower returns are those that do not take high risks.
“Those giving higher returns are desperate for money and willing to take any risk.”
Meanwhile, MP Ahmed Qarrata expressed concern that a new Pension Law in the pipeline would not only increase the age of retirement from 60 to 65, but also provide less benefits for pensioners.
“We are waiting for further details on how the new pensions will look,” he said.
“Instead of pointing the finger at MPs or reducing public benefits, the PFA should be seeking repayment of the BD100m loan it gave to Bahrain Mumtalakat Holding Company.”
MPs approved recommendations to restructure the PFA and appoint a new board and executive management, which they want to adopt a more aggressive investment approach.
They also called on the government to revise policies to ensure the PFA continues beyond the next decade.
The government will have six months to reply.
Meanwhile, MPs approved Bahrain’s plans to join the Asean Infrastructure Investment Bank despite concerns that it would encourage the government to borrow even more than it has already.
This is despite concerns expressed by some that it did not follow Islamic banking principles.
“The fund has members from Asia and across the world who are together to find solutions for current financial problems or those that may occur in member countries and we need to be there,” said Shaikh Ahmed.
“When we want to borrow anything from this fund, or anywhere else, we will come here to parliament.
“We had an option to borrow from the World Bank, but we didn’t because we don’t need it.”
Bahrain’s reliance on borrowing since the 2014 oil price crash has seen government debt rise to the equivalent of more than 80 per cent of the country’s GDP.