Lifesaving fund for retirees ‘in sight’

MPs set to tap BD463 million surplus from unemployment fund for yearly pension increases 

Parliament is expected to vote on a proposal to draw from a BD463 million surplus in the Unemployment Insurance Account to cover yearly increases in pensions. The aim is to ease the pressure on the main retirement funds, which remain under financial strain. 

The proposal has been submitted by five MPs: Khalid Buanaq, Dr Ali Al Nuaimi, Ahmed Qarata, Zainab AbdulAmeer and Eman Showaiter. Clause It seeks to add a new clause to the 2006 law on unemployment insurance, allowing the surplus to be used for pension increases granted under any retirement or insurance scheme. This arrangement would continue until both the Pension and Social Insurance Fund and the Military Pension Fund are able to cover the increases on their own. 

The Services Committee has backed the move after reviewing the wording and reasoning behind it. Purpose Members present agreed that the surplus, which has been building up over recent years, could be used for this purpose. As of the end of December 2023, the Unemployment Insurance Account held BD463.2 million in net assets. The amount reflects the difference between income and outgoings, with BD54.4 million left over in 2023 and BD51.3 million in 2022. 

By law, any excess confirmed by an actuary must be moved to the account’s reserve. Decision That money may only be spent following a Cabinet decision, with the minister’s recommendation and approval from the board. Previous withdrawals have gone towards pandemic-related wage support and one-off job schemes. This proposed clause would allow the fund to cover yearly pension increases on a temporary basis. The wording makes clear it is a stopgap. 

Cost Once the pension funds have enough to meet the cost themselves, the use of the unemployment account would end. The proposal does not alter existing rules but adds another permitted use of the surplus. It would be the eighth item listed under paragraph (c) of Article 8 in the same law. Parliament’s Legal Affairs Committee found no constitutional issue with the draft. 

Coordination The Military Pension Fund said coordination with the Cabinet would be required and its position would be included in the government’s formal reply. In their explanatory note, the MPs said the aim is to protect retirees from the effects of rising prices. 

They cited Article 5 of the Constitution, which states that the State must provide social protection for those unable to work, including the elderly and unemployed. Audited report They also referred to an audited report presented to Parliament. It confirmed that the unemployment account has built up a financial cushion beyond what is needed for its current remit. They argued that using these funds to cover pension increases serves the wider public interest and fits within the intent of the law.