Pensions reform question
The Pensions Working Group (PWG) recently published its final report on pensions reform. In its executive summary, it lists a total of six primary concerns, numbered 1 to 6. The No. 1 concern is the following: "01. Maximum Pension Income: The general...
The Pensions Working Group (PWG) recently published its final report on pensions reform. In its executive summary, it lists a total of six primary concerns, numbered 1 to 6. The No. 1 concern is the following:
"01. Maximum Pension Income: The general position is that the Maximum Pension Income (MPI) of Lm6,750 introduced in 1981 is no longer adequate and must be changed. Various ways of how this should be achieved are proposed."
The PWG then goes on to propose that "the MPI ceiling should be set at Lm9,000 as from January 1, 2007" . However, they have also recommended that this increase should only apply to the Switchers group, i.e., those persons who will be 45 years old or younger on January 1, 2007. The Transitional group (those aged between 46 and 54 years on January 1, 2007) will not be, as the PWG puts it, "impacted by the proposed increase in the Maximum Pension Income ceiling".
The PWG also proposes that the statutory retirement age should be increased gradually for the Transitional group, as shown below.
Years of Age as at January 1, 2007 |
Retirement Age |
55 years of age and over |
No Change |
51 years of age to 54 years of age |
62 years |
48 years of age to 50 years of age |
63 years |
46 years of age and 47 years of age |
64 years |
45 years of age and below |
65 years |
So the Transitional group is hit both ways; their retirement age is increased, however, the MPI remains the same. This despite the fact that MPI, resulting in a maximum pension of Lm4,500, was set in 1981. Lm4,500 might have seemed a lot of money in 1981. However, a person aged 46 on January 1, 2007 will retire in 2025. This is 44 years after 1981, when Lm4,500 will be way below the poverty line. I hope that the automatic indexing proposed by the PWG will at least cater for some of the inflation.
Can someone please explain the reason why the increase in the retirement age is gradual, whereas the increase in the MPI is not?