Notes of third meeting Of the Technical Committee on Pension Reforms held on Friday 13 January 2017 v 23[II>Notes of Technical Committee meeting on Pension Reforms held on Friday 13" January 2017 at 10 30 hrs in the conference room of this Ministry, 13" Floor, Renganaden Seeneevassen Building, Port-Louis. Were Present: Name Designation Mr. B. Boyramboli Permanent Secretary, Ministry of Social Security, National Solidarity and Reform Institutions (Chairperson) | Mr. S.K Pather ‘Senior Chief Executive, Ministry of Civil Service and Administrative Reforms Mr. F. Fatadin Commissionner; Social Security Mr. A. Acharuz Director, MOFED Mr. V. Ramkelawon, Lead Analyst, MOFED Mrs. Y. Cassimally ‘Ag Director of Statistics ‘Mr. M. Cheeroo Economist Mr. P. Dinan Economist Mr. Abdool Satar Jackaria ‘Actuary Mr. P, Dursun Chief Operating Officer Business Mauritius Mr. A. Goder Swan Life Ltd Mr. &. Imrith Ail Employees Confederation Mr. R. Chuttoo Trade Union Consultative Congress Mr. V. Rambarassah Senior Analyst Mrs 0.Vinktaremdoo ‘Assistant Permanent Secretary, Ministry of Social Security, National Solidarity and Reform Institutions (Secretary) In attendance Mr. J. Hauroo Deputy Permanént Secretary, Ministry of Social Security, National Solidarity and Reform Instituti Mrs. K. Vyapooree MOFED Ms. Z. Ebramjee MOFED_ Mr. A. Baganee MOFED_1.0 ua. Se L609 3¢% 2.0 23,000 Welcome address 29 3 Mr. Boyramboli welcomed the members to the third meeting of the Technical Committee and declared the meeting open. Approval of notes of meeting ‘The Notes of previous meeting were approved with the following amendments: (i) (in tw) At para 2 (ii) — Mr. Imrith stated that the word "by’ should be replaced by “in respect of” Para 2.3 should be rephrased as “Mr. Imrith enquired about the scheme set up by Government inviting beneficiaries of BRP to transfer their pension benefits to this fund. He wanted to know about the status of the scheme for record purposes.” At para 2.5 — Mr. Dursun clarified that rather than benefits, he meant that the level of benefits should be granted depending on people’s economic status. At para 2.6 ~ Mr. Imrith referred to the success of the Family Planning programme introduced in the early 70’s and its impact on BRP and its beneficiaries post 2030. He also stated that this impact would be critical in any analysis. Matters arising 21 2.2 The Chairperson requested for clarification whether BRP and NPF should be taken in isolation. He also stated that the presentation made by Mr. Fatadin in the previous meeting provided a clear overview of the architecture of the Pension System in Mauritius. Mr, Dursun requested for statistics regarding the number of employees who should be contributing to the NPF but they are not doing so. He referred to the own-account workers as an example, He even suggested to consider the fiscal space concept23 24 25 2.6 27 Mr. Chuttoo stated that NPF and BRP were not related and he expressed concern that there was still confu: n between these two. The Chairperson agreed that NPF and BRP should be considered separately to avoid any confusion. He emphasized that BRP needed to be look into in the first instance, followed by NPF. Mr Jackaria queried on the functions of the NPF and whether Government intervened in its operations and he was informed that the Government did not intervene. Mr. Chuttoo requested for the statistics on the following in order to fine-tune the NPF: The number of genuine cases where enterprises have deducted NPF contributions from the salaries of their employees but the contributions have not been credited to the account of the NPF; Whether employees have benefited from any write-offs for non- payment of workers’ contributions; Whether employers have been sued before a court of justice for embezzlement; and Whether employers have benefitted from exemptions with regard to payment of contribution: respect of foreign workers. Mr. Boyramboli invited Mrs. Cassimally to communicate statistics regarding the number of beneficiaries benefiting from more than one pension.tt was then stated that a joint paper was being proposed with Mr Ancharuz and same would be presented to the Committee. Mr. Cheéroo suggested to lock at the sustainability of NPF in the futuré taking into consideration the new retirement age, different scenarios of economic28 Pensine 29 growth and other related factors. He stated that one consideration needs to be given for fairness towards the beneficiaries. Mr. Chuttoo agreed and added that the Committee could also take into account the fact that the number of foreigners working in Mauritius might increase in the future. Mr. Chuttoo emphasized that a person receiving more than one pension was in fact entitled to a gratuity on retirement in addition to BRP or NPF. Mr. Goder agreed thet for Private Pension Schemes, a retirement gratuity is provided to the noe per the Employment Rights Act in absence of payment of pension benefits in the private sector. At this stage, Mr Imrith pointed out that public officers make a contribution of 18 % for their pension benefits. Mr. Acharuz proceeded with his presentation on forecasts of BRP as a percentage of tax/GDP and other statistics. He projected various pension reform proposals, as follows : * Full BRP is payable to persons aged 60+ who are NOTIN EMPLOYMENT. © 50% of BRP is payable to those aged 60+ who are IN EMPLOYMENT And Full BRP is payable to those aged 60+ who are NOT IN EMPLOYMENT. * Non-indexed BRP (fixed) is payable to those aged 60+ who are IN EMPLOYMENT and Full BRP is payable to those aged 60+ who are NOT IN EMPLOYMENT ‘© BRP payable to persons reaching the legal retirement age of 65 as from 1 ‘August 2028. (Regardless of employment status.) * At 60, a reduced benefit of 50% of BRP will be paid until the legal retirement age of 65, after which he/she will be eligible to benefit from the full BRP. ‘* Full BRP to individuals aged 60 and above and whose monthly total revenue is less than the individual income tax threshold (currently Rs 23,000). (New cases)2.10 241 242 ‘© Full BRP to individuals aged 60 and above (including existing beneficiaries} and whose monthly total revenue is less than the individual income tax threshold (currently Rs 23,000). '* Automatic indexation instead of intermittent uprating, * Increase pension age incrementally. * Introducing affluence test. * Introducing married rate of BRP, ie. 1.6 times a single person's pension. Following the presentation of Mr Ancharuz, the Chairperson invited the members to give their comments/opinions/views. Mr. Goder stated that with an ageing population, it is essential that appropriate amendments be made to the current pension system promptly. He even highlighted that BRP is not contributory. Mr. Jackaria further agreed that BRP, generally, follows the “pay as you go” principle worldwide. Mr. Goder also added that the growth assumptions referred to in the presentation appeared to be unrealistic. In this context, Mr. Dinan stated that ‘the following aspects ought to have been taken into account : * the capacity to pay beneficiaries, i.e sustainability; and * any economic growth assumptions made might have led to the same forecast. Mrs. Cassimally highlighted that the presentation made by Mr. Acharuz was based on many assumptions and that it was very difficult to make economic projections. For example, government expenditure on old age persons might increase in the future. Mr. Dinan considered that demographic trends such as fertility rate might decrease.2.13 2.14 2.45 Mr. Jackaria stated that other problems might arise if Government decides to put 2 cap on BRP as a percentage of tax/GDP. Government would then have no alternative than to reduce other expenses to cater for BRP. Mr. Chuttoo stated that Government should take into account the nature of work of different people while deciding upon the new retirement age. Mr. Pather agreed with Mr. Chuttoo’s view. However, he emphasized that by February 2017, the Committee needs to come up with concrete proposals on pension reforms. He agreed that it would be preferable if the political masters ‘would apprise the Committée of their intention pertaining to the sustainability of the pension system in Mauritius, especially BRP. The Chairperson stated that the views of the political masters have already been captured in the Budget Speech 2016/2017. Hence the setting up of the High Level Committee. The Technical Committee has been mandated to generate options that could help the government to make informed policy decision. Mr R. Imrith gave an apercu of the universality of Basic Retirement Pension in Mauritius which was introduced in 1976. He reminded the members that it was a political decision taken by late Sir Seewsagur Ramgoolam in the interest of our elderly persons (with a view to ensuring their income security. } He also highlighted the different increases in the BRP since 1976. The last increase was effected in December 2014 and this was also a political move of the newly elected Government. Todate, the BRP amounts to Rs5450/- monthly and the Government is prepared to use it as 2 political tool, if need be for future, being given that some Ministers are canvassing the idea of further increasing the BRP in private gathering, which is in contradiction with what are being discussed at the level of the Technical Committee, He further argued that we should be able to know what are in the mind of our political masters.3.0 40. 216 247 Following the presentation made by Mr Ancharaz, Mr Imrith further expressed the opinion that the public officers seemed to be working for the opposition parties when there is proposal to make BRP compulsory at the age of 65 instead of 60 years. Mr. Acharuz agreed that the problem regarding the pension system in Mauritius has been mentioned in the Budget Speech. The Committee could only provide suggestions based on different assumptions and the onus would be on the High Level Committee to decide on the way forward for the BRP in the future. Mr. Rambarassah was of opinion that we could also look at the optimistic side. For instance, with a decline in birth rate, other expenses might decrease, for the budget of education. Mr. Acharuz considered that it would be preferable to increase the income of the country by proposing amendments to the present pension system as a precautionary measure. The Chairperson invited the members of the Committee to come up with additional options regarding pension reforms for the BRP so that same could be circulated and discussed at the next meeting. Next Meeting The next meeting has been scheduled for Friday, 27" January 2017 at 10 30 hrs. End of Meeting The meeting ended at 12 30hrs with a note of thanks from the Chairperson.Re: NOM of technical committee held on 27 Jan 2017 (Based on 2017 pension rates) BRP for persons aged >=65: unchanged BRP for non-working persons aged 60-64: unchanged BRP for working persons aged 60-64: Age Monthly Rate (Rs) 60 1,000 61 2,000 62 3,000 63 4,000 64 5,000 ara 4.6 ane Reduction in amount (Rs mn O17 849 [___2019 887 2024 999) 2029 989) 2034 894 2039 ~ 14 2044 1,045 2049 906 2054 1,001 ' Assuming that 36% of persons aged 60-64 years are employedRe: NOM of technical committee held on 27 Jan 2017 para 4.19 (Based on 2017 pension rates} Assuming that a person gets full BRP if he takes his BRP at age 65 and @ reduced BRP if he takes it at age 60 years. Reduction in amount (Rs mn) based on a reduced vie rate Rs 3,350 to persons aged] _ Rs 4,500* to persons 60-89 yrs aged 60-89 yrs 7 Zit 2019 5,863 2,653 7,025 a 3,178 7,925 3,586 eee 8,343, 3,774 8,77: 3,969 9,071 al 8,953 4,050 9,019 4,080 ESTIMATION OF REDUCED BRP Life expectancy at age 60 years= 20.37 yrs Life expectancy at age 65 years= 16.81 yrs A person aged 65 years fs expected to receive during his/her lifetime a total BRP amount of Rs. = 1,190,989 {f 0 person opts to receive BRP at reduced rate as from age 60 years, the monthly BRP amount (Rs) = 4,498 ard Rs 4,500