Current pension scheme unsustainable: Shujatha

Speaking at a sitting of Parliament’s Public Accounts Committee, Pension Office CEO Shujatha Haleem said that if the proportion of the population aged 65 and over reaches 7 percent by 2030, as projected, the state’s current pension model will become increasingly unsustainable.

Shujatha highlighted that the Pension Act has been in effect for 15 years and called for urgent reform to address inefficiencies and inequalities particularly those stemming from separate pension schemes run by various government agencies.

“It’s very important to set a clear timeline for phasing out existing arrangements and implement proper procedures under a unified framework,” she said.

Shujaha noted that the most pressing concern is the high cost of pension schemes operating outside the Pension Act. These schemes often offer defined benefits without requiring employee contributions, creating a disincentive for individuals to join the contributory national pension scheme.

“There’s an equity issue,” she said. “Some people receive defined benefits when they retire, while others, particularly government employees, fall under a different system. That creates a discriminatory structure.”

Shujatha also warned that even if current benefit levels are maintained, the rising elderly population will significantly increase the burden on the pension system. She stressed the need to adjust allowances based on inflation and evolving living standards.

Committee members urged the Pension Office to develop a timeline for proposed legislative changes and supported the idea of centralizing all pension schemes under the Pension Administration Office.

Currently, 13 state institutions operate individual pension schemes. The 2024 state budget allocates MVR 272 million for these schemes. In 2023, MVR 266 million was spent on “double pensions”- benefits drawn from more than one scheme. Over the past five years, spending on double pensions has increased by MVR 70 million.

The Pension Office is expected to hold further discussions with the Ministry of Finance and the Pay Commission on consolidating all schemes under a single legal and administrative framework.