The government has announced the discontinuation of the monthly allowance for newly retired employees beginning January 2025. The decision was communicated in a letter from Finance Minister and Pay Commission Chairman Moosa Zameer, addressed to relevant agencies.
The letter clarified that employees retiring by the end of December 2024 will continue to receive the allowance as per the existing policy. However, retirees from January onwards will no longer be eligible. The letter did not specify if lump sum payments currently provided to retiring employees will be affected.
Additionally, the monthly basic pension of MVR 5,000 for individuals over 65 will be discontinued for high-income earners starting in April 2025. The government stated that pensions will be provided based on income levels, though details on how high-income and low-income earners will be defined have not yet been disclosed.
The Ministry of Finance has raised concerns about rising pension expenditures driven by increased life expectancy. Currently, pensions account for less than 1% of GDP but are projected to exceed this threshold in the next decade, reaching 2.8% of GDP—or approximately MVR 8 billion—by 2055.
The ministry also announced plans to propose legislative changes to address the issue of double pensions, though specifics have not been provided. These changes come amidst growing discussions on how to manage the financial challenges associated with an ageing population and the long-term sustainability of the pension system.
