Senior Economist at the World Bank, Robert Palacios, has recommended a temporary halt to pension schemes for the Maldives National Defence Force (MNDF), police, judiciary, and other independent agencies to ensure the financial sustainability of the country’s pension system. Speaking at the Maldives Finance Forum, organised by the Pension Administrations Office in Kurumba Maldives, Palacios highlighted the pressing need for reforms in the current pension system, which he described as unsustainable.
Palacios, who was instrumental in introducing the pension scheme in the Maldives, emphasised the urgency of accelerating measures to strengthen the system. He pointed out that 13 agencies in the Maldives currently offer double pensions, with the largest allocations going to the MNDF and police.
The economist suggested that eliminating double pensions and discontinuing pensions for the affluent could alleviate the financial strain on the pension system. “The richest 10 or 20 percent of the population could be eliminated from the pension scheme,” Palacios proposed.
Introduced in 2009, the universal retirement pension scheme marked a significant shift from the previous system, which operated solely as a state expenditure without employee contributions. However, Palacios indicated that the foundational principles of the 2009 pension system have been compromised, particularly following the introduction of elderly allowances, which are set at twice the amount of the basic pension.
“This has been the biggest obstacle to sustaining the entire system,” Palacios noted. He also pointed out that additional double pension schemes have exacerbated the financial burden on the system.
Without addressing these critical issues, Palacios warned that the sustainability of the entire pension system is at risk. His presentation at the forum highlighted the priorities and challenges in maintaining the pension system’s sustainability, urging immediate action to prevent further financial instability.
The recommendations from Palacios come at a crucial time as the Maldives grapples with ensuring long-term financial security for its ageing population. The proposed reforms aim to create a more balanced and equitable pension system, reducing unnecessary financial burdens while maintaining essential support for those in need.
