Mauritius : Modernizing an Advanced Pension System
The report examines the pension system in Mauritius, a country which over the past two decades, has made enormous progress in economic development, and poverty reduction, and which today, is facing a much earlier demographic transition in its devel...
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| Language: | English en_US |
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Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/06/4962296/mauritius-modernizing-advanced-pension-system http://hdl.handle.net/10986/15691 |
| Summary: | The report examines the pension system
in Mauritius, a country which over the past two decades, has
made enormous progress in economic development, and poverty
reduction, and which today, is facing a much earlier
demographic transition in its development cycle, than other
upper income, and high income countries have experienced.
The questions being addressed are whether the current
pensions arrangements will be financially sustainable, given
the projected ageing of the population, and whether they
will be equitable and efficient, at a time when the system
will be relied on by a growing number of people. Mauritius
has a three-tiered pension system that helps the poor, and
provides moderate (although declining, in the case of the
private sector) replacement income for working people, and
no regulatory protection for voluntary retirement schemes.
The un-funded nature of the universal scheme, together with
the income maintenance scheme of the civil service, are
endangering the country's economic stability. At the
same time, declining benefits to the working class, are
jeopardizing living standards at retirement, while the lack
of a regulatory environment for private savings, discourages
maintaining private savings through the formal financial
system. Concurrently, public sector management of the
private contributory schemes, deprives contributors of
maximum returns, and concentrates risk only on the local
economy, enhances government consumption, and deprives the
domestic private sector of financing sources. The poor
performance of the contributory tiers, exercises upward
pressure on the un-funded tier, increasing the system's
fiscal risks. The report adopts an approach that seeks to
diversify the economic, and political risks inherent in
pension systems, for while economic risk can come from
fiscal concerns, particularly of un-funded schemes, and from
re-distributive concerns, political risks otherwise, arise
from outside the country's financing capacity. The
approach suggests maintaining a small, and efficient
un-funded re-distributive component (first pillar) to meet
the needs of the poor, and, a dual, funded, and privately
managed component for income maintenance, and life-time
consumption appease. The dual character of the funded
component aims to assure moderate replacement income, via a
mandatory privately managed scheme (second pillar), and to
provide as well, opportunities for private provision to meet
individual preferences, or labor market response for
supplementary pensions (third pillar). |
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