Pensions office performs U-turn on benefit increase

After initially reporting that the promised pension increase from MVR2300 to MVR5000 could not be done this month, the Maldives Pension Administration Office (MPAO) today confirmed that it is working to transfer the MVR5000 by tomorrow.

The CEO of the office had yesterday told Haveeru that it had not received the additional funds for the increase and that it would therefore transfer the current MVR2300, giving the rest when the government released additional funds.

“They are doing this to fulfill a government pledge. This has nothing to do with the pension fund. We will not increase it to MVR5000 by taking money from that fund. What we will do is transfer it when the government provide us with it,” Manik was quoted as saying.

The state funded pension for all citizen’s above the age of 65 was introduced in 2009 at MVR2,000, and was later increased to MVR2,300 through an amendment to pension legislation.

A further increase to MVR5000 – starting from March 2014 – was an election pledge of President Abdulla Yameen, though changes to the amount disbursed from the existing pension funds will require another amendment to the act.

Cabinet minister Ahmed Adeeb has recently assured that the increase would take place in March as promised, saying that it can be funded through a sustainable model based on long term bonds and T-bills.

Adeeb also talked about the prospect of combining various funds such as housing, health insurance, and pension funds into a single fund.

The government had already allocated MVR470 million (US$ 30.5 million) in the state budget for the MVR2,300 allowance (US$149). These funds will now be invested in the retirement pension fund or in financial instruments such as T-bills in order to generate the monthly MVR5000 stipend, Adeeb has said.

Following Manik’s comments yesterday, Adeeb told Haveeru that the delay was due to the first of the month falling on the weekend and “because it is a new allowance”.

Yesterday, MPAO CEO Manik stated that eighty percent of the pension funds are already being invested in T-bills sold by the government to finance the budget deficit, and that discussions with the government are underway to invest the rest of the funds in bonds.

While the government maintains this to be a sustainable model of financing the increase in pensions, critics have argued that, with a MVR1.3 billion (US$84.3 million) deficit budget, the move will plunge the country further into debt.

“These are loans, and taking loans is acceptable to invest in to increasing productivity. But this is not such an investment, this is something the government is spending. Eventually people will have to bear the burden of this,” former Economic Development Minister Mahmud Razee has remarked.

Last December, the central bank and regulator – the Maldives Monetary Authority – advised the state to pay all due treasury bills and treasury bonds and to turn existing short-term debts into long-term ones.


4 thoughts on “Pensions office performs U-turn on benefit increase”

  1. Government need to reduce the money that they spend on " Parliament Monkeys" and this will reduce huge amount of money .

  2. Ladies n gentlemen n Laura, listen carefully. All your pensions are tied to the Maldivian government debt. That debt is ballooning out of control year upon year. When you come to retirement, how confident are you that you'll get your pension?

    This is the question you must ask NOW before paying any more money into this so-called "pension" scheme. In reality this is not a pension scheme as is known in other countries. This is a casino operation! They are simply gambling your money!

  3. Ok. May be I don't get the smarmy economics involved. Pray, someone tell me what happens when:
    1) There is a dollar shortage in the country;
    2) There is a serious problem of local healthcare facilities and education facilities that is making thousands seek overseas trips every year;
    3) Government pumps over One Billion Rufiyaa into the economy over the year.

    So - what happens? I thought every pensioner (i.e., senior citizens over 65 yrs) will very wisely invest this money in Government T-Bills and hence prevent a possible increase in property rent index, consumer price index and more importantly prevent too much rufiyaa chasing too few dollars. A very smart policy by the President. Treasury will be able to recoup One Billion Rufiyaa in one clean sweep. IF ONLY!

  4. Good comments by 'mode' - until this is organized properly - this is not even close to a pension fund you can trust and rely on for the future.
    Too much instability in the economy due to instability in politics.
    I seriously wonder about how calculations are made - and how they manage to believe it is adding up...


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