More than 95,000 Bahrainis will see their pension arrears credited into their accounts soon, Shura Council chairman Ali Saleh Al Saleh has said.
He made the remarks after the council gave the green light to a six per cent rise in pensions backdated from January 2021. The members unanimously approved amendments to the 1976 Social Insurance Law and the 1975 Civil Servants Wages and Pensions Law at an extraordinary session yesterday.
It has been referred to His Majesty King Hamad for ratification following Parliament’s approval on Tuesday.
Pensioners from both the public and private sectors will benefit from the decision. The increase would be backdated to January 2021, with three per cent accorded to last year and three this year. However, in all, the maximum increase will be capped at BD60.
Council members also voted to give an annual increase in pensions whenever there is a surplus.
They also voted to gradually increase monthly pension contributions until it reaches 27pc of the salary, with the individual contribution not exceeding 1pc.
Expatriate workers would be enrolled into the pension system and their end-of-service benefits will be paid by the Social Insurance Organisation (SIO).
The retirement age will officially remain 60. However, people can opt to work until 65 and their maximum pensions will be capped at 90 per cent of their salary, instead of the current 80pc.
Legislators and the government also decided to restore the right to buy ‘giveaway’ years to allow workers to take early retirement with the government making up the difference in financial obligations to the SIO. Pensions will be calculated on an average salary from the final five years of employment.
Members also took a retrospective vote to unanimously approve urgent reforms to pension rules issued by His Majesty through a royal decree during National Assembly recess in 2020.
“We need to balance revenues and pension spending to ensure current funds stay intact and don’t go bankrupt,” said Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa, who is also politically responsible for the SIO.
“For a long time we have been exploring options with legislators and what we have today is the best approach forward for our futuristic plans,” Shaikh Salman said.
“We wanted to protect the fund, pensioners, current workers and employers while not imposing a burden on all and the laws are effective from the day they get amended and there are no backdated financial obligations that the SIO will collect.
“For example, MPs wanted expats to be fully enrolled at the SIO – but following a study, we found that it would cost the organisation more in benefits than contributions. So we have opted for an end-of-service scheme whereby company will pay for its expat employees’ pensions in monthly instalments and the amount will be given back to the foreign workers as they end their service.”
SIO board chairman Mahmood Al Kooheji said the amendments give flexibility to plans for pensions’ reforms.
“The amendments will enable us to put things on the right track, while also ensuring more revenues to meet the new benefits,” he said.
“We are happy with the current outcome as we work towards stabilising funds and ensuring their continuity.”
SIO chief executive Eman Al Murbati explained the difference between buying virtual years and giveaway years.
She said while one allowed current workers to buy years of work to secure higher pensions, the other allowed the employer to give away those years, without charging employees, as a gesture, handshake or token of appreciation.”
There are currently 150,000 workers from both sectors registered at the SIO and the deficit alone in the government’s pension fund is more than BD14 billion.
The government had presented six reforms last year after projections showed the public pension fund would go bankrupt in 2024 and the private pension fund by 2033.
mohammed@gdn.com.bh
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