Bahraini pensioners in the private sector may soon be allowed to apply for a replacement (commutation) loan two years after receiving their last lump-sum payment, bringing them in line with the time limit granted to government employees.
Previously, private sector retirees had to wait until their existing loan was fully repaid before becoming eligible for another, creating a disparity between the two pension systems.
The proposed legislation aims to remove this restriction and ensure parity in financial benefits and access for pensioners from both private and public sectors.
Parliament is scheduled to vote on the draft bill on Tuesday.
Replacement (commutational) loan refers to the process of pension commutation, which is the ability for a pensioner to receive a portion of their future monthly pension payments as a single, lump-sum amount. The cash thus received is paid for by a fixed reduction in their monthly pension for the rest of their life.
In a significant step towards strengthening social justice and pension equity, the Cabinet, chaired by His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister, approved a parliamentary proposal to amend Article (144) of the Social Insurance Law issued by Decree-Law No (24) of 1976.
The decision aligns the rights of private sector retirees with those enjoyed by public sector pensioners under the government pension law.
The draft legislation proposed by Parliament was reviewed and endorsed by the Legislation and Legal Opinion Commission.
Following the review, the government formally expressed its approval in an official memorandum, affirming the bill’s alignment with Bahrain’s social and economic development objectives.
Government officials said the change ‘reflects the kingdom’s ongoing commitment to equality, fairness and financial sustainability across all segments of society’.
In its memorandum, the government emphasised that the proposed reform contributes to enhancing the standard of living for retirees, while maintaining the financial stability of pension funds. By shortening the interval between commutation benefits, the law will allow retirees to better manage personal finances, especially in times of rising living costs.
The Cabinet underscored that the law supports Bahrain’s broader economic diversification and labour market initiatives, particularly by making long-term employment in the private sector more attractive. The government views pension equality as essential to motivating citizens to pursue private sector careers while ensuring that retirement benefits remain balanced, sustainable and fair.
The commission also confirmed that the new wording of Article (144) mirrors similar provisions in Article (78) of Law No (13) of 1975 for public employees and Article (44) of Decree-Law No (11) of 1976 on military pensions.
It noted that this harmonisation strengthens the coherence of Bahrain’s overall social insurance system.
The new version of Article (144) will read as follows:
“Replacement shall be within the limits and in accordance with the conditions, procedures and cases stipulated in a decision issued by the Minister based on a proposal from the Board of Directors. Replacement may not be carried out more than once every two years from the date of the last replacement.”
The law mandates that the Prime Minister and relevant ministers implement its provisions, which will come into effect the day after publication in the Official Gazette.
Officials hailed the amendment as a continuation of Bahrain’s efforts to uphold social equity and pension sustainability, principles central to the reform agenda led by HRH the Crown Prince and Prime Minister.
“The approval of this amendment is a clear message that the government remains committed to enhancing citizens’ welfare while protecting the financial integrity of pension funds,” the Cabinet memo said.
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