BASIC RETIREMENT PENSION – REFORM – INCOME SUPPORT (3.31 p.m.)

Mr Deputy Speaker, Sir, with your permission, I wish to make a statement concerning the reform of the Basic Retirement Pension. The reform is to gradually raise the eligibility age of the old age pension from 60 to 65 years over five years. I want to speak directly and honestly to all Mauritians who look to this Government for leadership in difficult times. First of all, let me repeat again. There is utter confusion in the mind of many people between what is a contributory pension and a non-contributory one. A contributory pension plan requires the beneficiary to pay into the plan from his salary, like occupation pensions. In a non-contributory pension plan, the beneficiary does not contribute for the benefit he receives. The BRP is a non-contributory pension. There is no contribution from beneficiaries. It is funded from the Consolidated Fund. As a compassionate Government, we have heard the voices of the people, we have listened to their concerns, and have acted on them as far as possible, because the danger for the country is not being exaggerated, it is real and dramatic. Let me once again assure the House and the population that the Government has not taken the decision to reform the Basic Retirement Pension lightly. We have acted out of necessity, not out of choice. Let me recall some of the reasons that have motivated our decisions. First, the cost of Basic Retirement Pension payment has become explosive and is unsustainable. BRP spending in Mauritius has soared from 1.9% of GDP in 2010 to 7.8% in 2024-2025. Basic Retirement Pension expenditure alone would be Rs55.4 billion this fiscal year. It has almost doubled in 4 years, Mr Deputy Speaker, Sir! It will reach Rs100 billion in 2035. That is clearly unsustainable! Second, demographic pressures are aggravating the cost of implication of the BRP. Mauritius, as we know, has an ageing population and a declining birth rate. The population aged over 60 and above has grown substantially from 186,400 in 2015 to 257,600 in 2024. It will continue to grow as the population ages and it will reach around 315,000 in 2038. As a result, without any reform, the cost of Basic Retirement Pension on the Government budget will exceed Rs100 billion. Third, as a result of the demographic trends, the ratio of active workers per retiree has plummeted from 7 in 2000 to 3.9 in 2015 and to 2.7 today, and it is expected to drop to 2 by 2035. This means fewer workers are supporting more retirees, placing immense strain on public finances. It is a fact that when the number of workers is much higher than the number of older retirees, the Basic Retirement Pension system is relatively sustainable. But when the number of workers shrinks and the number of old age pensioners soars, the system becomes fiscally unsustainable and financially unbearable. Fourth, in the last 14 years, spending on old age pension has ballooned by a staggering 828 percent. Fifth, Mr Deputy Speaker, Sir, the financial legacy of the previous government is an unbelievable mess with very high budget deficits, rising borrowing requirements and a mountain of debt for future generations. The country’s financial resources are, therefore, stretched to the limit and has reached the tipping point. The current pension system, if left unchanged, is simply not sustainable. The situation is such that without reform, we risk a future where there will be no pension at all for any retiree – neither today’s retirees nor those of tomorrow. As a responsible Government, we could not stay indifferent to such a threat to our society, in particular, to the elderly of our nation. We, therefore, consider it as the solemn duty of Government to ensure a strong and reliable pension system for generations to come. This is why we have chosen a phased approach: raising the eligibility age by one year at a time, starting with 61 next year, until we reach 65 in 2030. This gradual transition is designed to give families time to adjust, and to avoid sudden hardship for those nearing retirement. Mr Deputy Speaker, Sir, we are not alone in this challenge. Across the world, countries are raising retirement ages in response to longer life expectancy and financial pressures of supporting a growing elderly population. Our reforms are in line with global best practice, but we have tailored them to our unique circumstances, mindful of our people’s needs and our nation’s values. But let me be clear, Mr Deputy Speaker, Sir, compassion and responsibility must go hand in hand. We are doing reform because there is no choice – there is absolutely no choice! That is why we have set up two Inter-ministerial Committees to look into the matter and to balance compassion with responsibility. In the interest of time and expediency, we have merged these two Committees. Mr Deputy Speaker, Sir, after careful analysis of all the facts and figures, Government has decided that some families deserve support until they are eligible for the Basic Retirement Pension, which is according to the reform. Government has decided, therefore, to provide an Income Support of Rs10,000 per month to persons who reach the age of 60 years as from 01 September 2025. These persons will be eligible for the Income Support provided that – (a) in the case of a person who is single, his/her monthly income does not exceed Rs10,000, or (b) in the case of a person who is married, the monthly household income does not exceed Rs20,000. For a single person, the monthly income will include his emoluments, income from business or profession and contributory retirement benefits but it will exclude lump sum payable on retirement and other benefits (including the Invalidity Allowance) provided by the Ministry of Social Integration, Social Security and National Solidarity. For a married person, the monthly income will include emoluments, income from business or profession and contributory retirement benefits but it will exclude the lump sum payable on retirement and other benefits (including Invalidity Allowance) provided by the Ministry Social Integration, Social Security and National Solidarity as well as the Basic Invalidity Pension, the Income Support in lieu of the BRP or the BRP being drawn by the spouse. Most of the beneficiaries will be housewives, retirees, employed and self-employed that meet the criteria, which is larger than the initial criteria of focusing on sectors with difficult working conditions. On average, there will be some 7,500 eligible beneficiaries per age group annually over the next five years, which represents around 46% of those turning 60. This special effort made by Government will cost some Rs8.7 billion over the next five years. The Mauritius Revenue Authority will be responsible for the payment mechanism. Beneficiaries will have to submit a one-time application for the Income Support to the MRA unless there is a change in circumstances. The Income Support will be credited directly in the bank account of the beneficiaries and payment is expected to start on 01 September 2025. Mr Deputy Speaker, Sir, in parallel, we will carry out a holistic review to improve the invalidity pension system which will start in the coming days. Furthermore, as announced in the Budget Speech, a Commission of Experts will be set up to look into the reform of the three pillars that constitute the pension system, as well as revamping of the National Pension Fund to replace the Contribution Sociale Généralisée. The Terms of Reference of the Commission are being worked out. The Chairperson and Members of the Commission will be appointed very soon. Mr Deputy Speaker, Sir, our decision has been guided by the need to balance social coherence and fiscal stewardship. While our decision favours our deep commitment to social justice, we have ensured at the same time that our roadmap to fiscal consolidation is not jeopardised. It has been a tough balancing act but, in the end, we are confident that with the cooperation and understanding of one and all, we will take our country safely to port. Thank you.