Draft Notes of fourth meeting Of the Technical Committee on Pension Reforms held on Friday 27 January 2017Notes of Technical Committee on Pension Reforms held on Friday 27 January 2017 at 10,39 hrs in the Conference Room of this Port-Louis. Were Present: Ministry, 13" Floor, RenganadenSeeneevassen Building, Name Mr. 8. Boyramboli Designation Permanent Secretary, Ministry of Social Security, National Solidarity and Reform Institutions (Chairperson) Mr. S.K Pather Mr. F. Fatadin Senior Chief Executive, Ministry of Civil Service and Administrative Reforms | Commissionner, Social Security | Mr. A. Acharuz | Director, MOFED Mr. D.Bahadoor Deputy Director, Statistics Mauritius é | Mr. V. Ramkelawon Lead Analyst, MOFED (Mr. P. Dinan Economist | (Mr. P. Dursun Chief Operating Officer, Business Mauritius | Mr. A.Goder Senior Manager, Swan Life Ltd Mr. R. Imrith Representative of All Employees Confederation = | Mr. R. Chuttoo Representative of Trade Union Consultative Congress Mr. V. Rambarassah Lead Analyst, Ministry of Social Security, NS & RI | Mrs. O.Vinktaremdoo Assistant Permanent Secretary, Ministry of Social Security, National Solidarity and Reform Institutions(Secretary) i Absent with apologies Mr. Abdool SatarJackaria Actuary (Mrs. ¥. Cassimally ‘Ag Director of Statistics. 1 Mr. M. Cheeroo Economist 1 ‘Mrs. K. Vyapooree MOFED. - 1° Inattendance Mr. J. Hauroo Deputy Permanent Secretary, Ministry of Social Security, National Solidarity and Reform Institutions Senior Statistician, Statistics Mauritius Statistician, Statistics Mauritius1,0 Welcome address 1.1 Mr.Boyramboli welcomed the Members to the fourth meeting of the Technical Committee and declared the meeting open. Approval of notes of meeting The Notes of previous meeting were approved with the following amendments:- (i) (ii) (iii) (iv) (vi) (vii) (vii) (ix) At Para 2.5 (ii): The word “employees” to be replaced by “employers”. At Para 2.8: “Private Pension Schemes” to be replaced by “Private Sector employees” and “beneficiaries” to be read as “employees”. The last sentence at Para2.8 was rephrased to read as “At this stage, Mr. Imrith pointed out that in the public service our pension schemes comprise a Contribution of 18 % from both employers and employees.” The third line at Para 2.10 to read as “He even highlighted that BRP is being categorized as non-contributory in the jargon of pension specialists.” The first line at Para 2.11 to be rephrased as follows: “Mr. Goder also added that using assumptions on the growth referred to in the presentation would appear to be unrealistic.” In the same paragraph, sentence “any economic growth assumptions made might have led to the same forecast” to be deleted. In the fourth line under Para 2.15, to delete the words “with a view to ensuring their income security’. At Para2.15: The word “seemed to be” to be replaced by “should not seem to be”. At Para 2.16: The word “agreed” should be reworded as “stated”. Para 2.17 to be rephrased as follows: “Mr. Ancharuz considered that it would be preferable to propose strategies to improve growth and income of the country. In the meantime, given the increasing costs of BRP, reform ea es could be worked out and proposed to address the issues in the pension system.© Statistics on genuine cases where employers had deducted National Pensions Fund (NPF) contributions from the salaries of their employees and which had not been credited to the account of the NPF would be worked out and provided at the next meeting; * There was no such provision in our laws to enable employers to benefit from any write-offs for non-payment of workers’ contributions; ‘+ No employers had so far been sued for embezzlement, instead they had been sued before a court of justice for non-payment of contributions to NPF; and * In the export manufacturing sector foreign employees were exempted from payment of contributions for an ial period of 2 years while for local workers, oe there was no such exemption. 22 Mr. Chuttoo expounded that employees contribute 3 % and employers 6 % with respect to the contribution for NPF and enquired whether same applied for foreign workers and it was confirmed. Mr. Fatadin highlighted that foreign workers had two options: they could either benefit from pension after attaining retirement age just like Mauritian citizens or had the option to request for their share of contribution to be refunded hor to the expiry of their contracts. Mr. Chuttoo further argued that foreign workers were almost unaware of these alternatives. Mr. Fetadin added that several announcements had already been made on these issues in the press. Mr. Chuttoo expressed concer on the fact that “V information could not be conveyed to concerned people due to the language barrier, The Chairperson suggested that a communiqué be issued anew. 23 Mr. Hauroo added thet the Human Resource Manager in any enterprise was duty bound to brief each and every worker, be it local or foreign, on their rights and privileges as well as the terms and conditions of their employment.e 4.0 Discussion held highlighted that the growth his presentation, Mr. Ancharuz Pather as to Upon a query from Mr. consideration the 4.1 While proceeding with assumption of 5% was an optimistic one. Ancharuz had taken into assumption that BRP would inflate in the future, the latter informed that no such forecast. Thereafter, Mr. pather suggested ts were indexed by the results. whether the forecasts of Mr. assumption was considered for the f that forecast to be also considered wherein BRP payment cost of living as this scenario would most probably produce more drastic Mr. Dinan added that the forecasts were also subject to the assumption of a stable currency. 4.2 Mr. Chuttoo highlighted that there might be a possible increase in tax revenue from foreign workers in the near future, thereby causing an increase in the GDP. Mr. Pather was of the opinion that while considering pension reforms, statistics 2s regards to foreigners should not be taken into account instead statistics pertaining to an ageing population only would be more useful. Mr. Dinan was of the view that foreigners only contribute to an increase in GDP and in this context, the Chairperson stated that tourists also contribute to tax through VAT. Mr. ‘Ancharuz stated that his forecasts had taken into consideration many assumptions. , Dinan on the Total Factor Production, the Chairperson 42 Following a query from stated the forecast of BRP with respect to the Total Factor Production was made further to the request of Mr. Cheeroo as it has a bearing on GDP. 44 On the other hand, Mr. Chuttoo stated that the factors considered for the forecasts were conservative and should have been more objective, for instance by taking into account other aspects such as unemployment. The Chairperson was ofScenario 2 if] FullBRP | 350 | 700 | 1,049 | 2,155 | 2134 | 2929 ) Emplo i) Employment ver | status determines a eligibility to BRP between the ages 60-64 for new beneficiaries. {assume 36% those aged 60-64 are in employment) Scenario 2 | (ii) Reduced benefits| 'f | Full BRP ayable to those in | Emplo la : 4 175 350 | 525 | 1,078 | 1067 | 964 employment and yed: | aged 60-64 years 50% | (new beneficiaries) | BRP {assume 36% those | | | aged 60-64 arein employment) ‘eae 3 Nil | FullBRe | 97 194 292 | 599 593 536 | (i) For New beneficiaries only BRP NOT payable to | those aged 60-64, whose monthly total revenue exceeds Rs | — SS| Scenario 3: Assumption- GDP 18.0% 18.4% 3.3% 3.3% } | has been estimated by | | assuming constant Total | \ Factor Productivity as in 2016 \ 3.2 The reform options were quantified per the framework below: © Scenario 1: Age . * Scenario 2 Employment * Scenario 3: Monthly Revenue Scenario AGE Estimated Reduction in the Cost of BRP | {Rs Million) | | | 60-64 65 years 2017 2018 2019 «2024 j 2029 | 2034 + | | | years | | ‘Scenario 1 wi | Fullerp | 972 | 4,983 | 2,915. | 5,987 | 5,928 | 5,358 | | | | is aligned with | Retirement Age of 65 (for new beneficiaries) | Le Scenario 1 50% | FullBRP | 486 972 | 1,458 | 2,994 | 2,964 | 2,679 BRP (ii) 50% BRP payable to those aged 60-64 & full BRP from 65 ‘onwards (for new eae’the opinion that internal factors only should be considered while analyzing sustainability of BRP. 4S Mr. Goder suggested that it would be more appropriate to conduct sensitivity tests using realistic hypotheses. For instance, a GDP growth assumption of 8% or 10% might not be realistic. If such scenarios were considered for forecasts, we ought to factor in that they would be too optimistic. He accordingly proposed to have forecasts over a longer period of time (20-25 years) as the situation might worsen in the long run. 4.6 While highlighting that members should have come up with proposal/s, Mr. Pather proposed an option in respect of those persons still in employment as indicated in the table below. [ ja Age BRP payment (in MUR) | 6061 1,000 61-62 2 cco | 6263 7 | 6-64. 4000 | 64-65 Ze 5/000 nn = =cuenn Full quantum He accordingly requested to have an estimation of the reduction in BRP4.8 Mr. Chuttoo underlined that increasing the retirement age would be unfair towards ladies who might not be working. Mr. Pather explained that BRP payment was not tied up to unemployment. Further, due to an ageing population, people were now economically active till the age of 65, the reason why the retirement age had moved to 65 years. 4.9 Mr, Chuttoo drew the attention of the Committee that only 2 minority of ‘employees in the private sector had been able to work till the age of 65 till now. He added that many employees working in other sectors (i.e. Construction Industry) had to retire at the age of 55 owing to extraneous physical capacity to work further, thereby impacting negatively on productivity. He therefore proposed that employees in such sectors to be allowed to retire at the age of 55. He also requested for a survey to be carried out on how many employees in the private and public sectors had the opportunity to work till the age of 65. Mr. Dursun mentioned that these statistics could be easily obtained from the NPF report comprising the number of persons still working and contributing beyond the age of 60. The Chairperson stated that the statistics would be circulated accordingly upon availability of same. 4.10 Mr. Pather was of opinion that many employees were willing to work till the age of 65 and even above. He added that even public sector employees had the right to retire before the age of 65. He also underlined that BRP was not a financial aid. in fact, people not working were benefiting from various social aid schemes other than BRP. 4.11 Members were invited to put forward propositions rather than just making inferences with regard to the proposals being presented. 4.12 Mr. Imrith pointed out that the forecasts made under the different options did not take into account both the impact of family planning and the effect of inflation4.13 which according to him were important factors. In this respect, it was noted that the forecast for BRP under the different options were made using non-indexed values. Mr. Chuttoo proposed the option of providing BRP at the age of 55 to those employees working in certain sectors being compelled to retire at 55 years, such retirement at the age of 55 had already been catered for in existing legislations He expounded that some 20,000 to 30,000 employees were under direct employment in the construction sector. Those employees had the possibility to retire at the age of 55 since it was not possible for them to work further, given the toughness of this sector and the fact that their employers did not allow them to work further due to lower productivity. He added that as far as contributory pension was concerned, 90 % of the employees in the construction sector were ‘on contractual basis and most of the contractors had not contributed to the NPF. Moreover, the employees could do nothing about it being given that Mauritians were also employed on a one month contract in certain industry comparable to a foreign worker, whose job was guaranteed for at least two years. As such at 55 years old, an employee may have almost nothing behind him unless if his employer renews his contract of employment, then he could benefit from gratuity on retirement. 4.14 Mr. Dinan stated that the problem highlighted by Mr. Chuttoo concerning the particular sector should definitely be solved without hampering the work beingbe known in the first instance in order to sort out iat for the availability of and Construction Sectors should the issue. He accordingly made a request to the Secretari the required Statistics. ; T 4.16 Mr. Chuttoo pointed out that consideration should be given tO thoselpeonie retiring at the age of SS and thus proposed that they should benefit from BRP at their retirement at that age. 4.17 Mr, Pather stated that it was important to know whether the people retiring at the age of SS were forced to take their retirement or they were merely exercising an option. He added that BRP should be related to retirement age since the Ministry of Social Security and National Solidarity had other schemes providing assistance to people who were in difficulty, for instance some 18,900 persons were currently benefiting from these social aid schemes. 4.18 Mr. imrith highlighted that members of the Committee should have been informed of the intention of the political masters. In this respect, the Chairperson stated that our debate should focus mainly on old age pensions, i.e. whether its eligibility should remain at 60 years or should it be increased and the reasons thereof should be flagged. In addition, it concerned the sustainability of the pension fund and the universal old age pension. 4.19 Mr. Pather made a second proposal to the Committee for consideration as to whether a person be given a choice to take his BRP at the age of 65, thereby being eligible to full payment of BRP. In case he would opt to take his basic retirement pension at the age of 60 then he would obtain BRP at a reduced rate ie. Rs 3,350 monthly.5.0 Next Meeting The next meeting was scheduled for Friday, 17°" February 2017 at 10:30 hours 6.0 End of Meeting The meeting ended at 12:25 hours with a note of thanks from the Chairperson. Ministry of Social Security National Solidarity and 08 February 2017 Environment and SD