Debate set for BD150 cap on pension returns

TDT | Manama

Email: mail@newsofbahrain.com

A proposal to limit the Social Insurance Organisation’s (SIO) charges on pension replacements to BD150 is heading to Parliament for debate today.

The suggested change, designed to lessen the financial load on pensioners, has been backed by the Services Committee, which argues that it reflects the need to adapt to social and economic shifts.

The proposal, put forward by MP Mohammed Al Maarafi, seeks to amend Article 77 of Bahrain’s 1975 law governing pensions and retirement benefits for government workers.

Under current rules, the SIO provides cash replacements for pension rights based on the applicant’s age, health, and a set calculation in the law.

Ceiling

However, no ceiling exists on the amount the organisation can collect as returns.

The proposed amendment introduces a cap to make the system fairer and reduce the strain on pensioners.

The Services Committee’s report, submitted on 28 January, emphasises that the amendment is in line with Bahrain’s Constitution, which obliges the state to ensure social security for its citizens in times of need, such as old age or illness.

Financial burden

The report argues that the uncapped returns currently charged by the SIO create an unnecessary financial burden for many beneficiaries.

Concerns, however, have been raised by the Financial and Economic Affairs Committee, which warns that the cap could cut into the SIO’s revenue from replacement schemes.

These schemes already charge lower rates than private banks, and any drop in revenue could impact the financial health of the pension fund.

Warnings

The SIO has echoed these warnings, noting that it relies on income from replacement programmes to support the fund’s sustainability.

It highlighted that reforms passed in 2022 were intended to extend the fund’s lifespan by balancing costs and income.

The organisation argues that limiting returns would undo these efforts and reduce its ability to meet obligations now and in the future.

Funds

The organisation also pointed out that returns from replacement schemes compensate for investment income lost when funds are withdrawn.

Additionally, they cover losses incurred when borrowers pass away before repaying, as remaining instalments are written off in such cases.