Minister of Finance Mohamed Maait stated on Saturday that the treasury had transferred LE94 billion to the National Authority for Insurance and Pensions since last July or the beginning of the current fiscal year, representing 58 per cent of the total LE160.5 billion due to be paid until 30 June 2020 to meet government obligations on pensions payments.
He said that he had given instructions to ministry officials to transfer the remaining amounts as scheduled.
Some months ago, Maait and former minister of social solidarity Ghada Wali signed a protocol to refund pensions within the framework of the new social insurance and pensions law. According to officials, this protocol reflected the government’s desire to draw the curtains on the thorny issue of pension funds.
In 2005, then minister of finance Youssef Boutros Ghali transferred the management of Egypt’s pensions from the National Investment Bank to the Ministry of Finance, including social insurance funds, and these have since been used in covering the fiscal deficit. The funds are estimated at LE1 trillion, according to Al-Badri Farghali, head of the General Union of Pensioners.
It had been announced that the Ministry of Social Solidarity had set out plans to pay sums owed by the National Investment Bank and the treasury to the National Authority for Insurance and Pensions.
According to the new social insurance law, the government is committed to paying annual installments for 50 years during which LE45 trillion will be paid to the Authority at an interest rate of 5.7 per cent. LE160.5 billion will be paid in 2019-20, and the amount will be increased annually to reach LE1.336 trillion during the seven coming years.
While the government believes that the plan will end the complicated issue of pension funds, pensioners’ representatives are not satisfied with the plan and the law.
Farghali said that the General Union of Pensioners had rejected the law when it was first submitted since it permitted pension funds to be “lost” in the state treasury. “This money was taken by the government to be invested in order to add benefits for pensioners. It is unfair now to repay this money at only five per cent interest as it should be 12 per cent at least according to the Central Bank of Egypt,” he said.
Moreover, repaying the money over 50 years meant that real value of the whole would be much less, he said.
Samir Radwan, a former minister of finance, agreed with Farghali that pensioners should have the right to receive their funds at an acceptable interest rate. It was essential for social justice that pensioners should receive a suitable income to help them meet their healthcare needs and basic requirements after retirement, according to Radwan.
He added that the minimum pension of LE900 was insufficient and that it should be equivalent to the minimum wage at LE2,000.
He said that the government’s repaying of its dues should be followed by appointing a specialised fund manager to invest the funds in commercial sectors and banks in ways best benefitting pensioners.
Social Insurance Law 148/2019 was issued on 19 August 2019. It was supposed to enter into force on 1 January 2020 except for certain articles related to treasury obligations which entered into force on 20 August 2019.
The prime minister is to issue the executive regulations of the law within six months of the date of issuance. The current law and decrees apply until the issuance of the executive regulations.
The new social insurance law will be applied to workers in both the private and public sectors. The law extends social insurance protection to new groups of employees such as temporary and seasonal workers, fishermen, overland transportation employees, housekeepers, agricultural tenants, reciters of the Quran and reciters in churches. The law includes 26 groups of employees, of which 10 are added for the first time.
However, Farghali told Al-Ahram Weekly that many pensioners were unhappy with the new law, which they say they were not allowed to participate in discussing and were neglected during its preparation.
The total number of pensioners in Egypt exceeds 10 million people, according to Farghali.
According to the new law, the National Authority for Social Insurance and Pensions will manage the combined funds for pensions, sickness, disability, death, workplace injury and unemployment benefits. Employees will become eligible for pension benefits after at least 15 years of contributions, up from 10 years in the old law.
Employers and employees will respectively contribute 12 per cent and nine per cent of their incomes, calculated on the employee’s total pay. Each contribution rate will increase by 0.5 per cent every seven years to reach a maximum combined rate of 26 per cent.
The normal retirement age will increase from 60 to 61 in July 2032 and thereafter by one year every two years to reach 65 by 2040.
To keep pensions in line with the inflation rate and help pensioners to meet their basic needs, pensions will increase annually according to the inflation rate up to 15 per cent. However, Farghali explained that this rate was unsuitable since inflation could reach 30 per cent.
In an attempt to put all employees on an equal footing having the same insurance privileges, all categories of insured persons will be subject to the new unified social law replacing three current laws: Law 179/1975 on social insurance for employees, Law 108/1976 on social insurance for employers, and Law 50/1978 on social insurance for Egyptians working abroad.
The new law includes an unemployment scheme. Employees will pay one per cent of their total salaries as unemployment insurance contributions. Employees who leave work without prior notice and those who are dismissed will also be allowed the unemployment insurance.
Workers in dangerous or difficult jobs will receive extra pensions benefits, but their employers will have to pay higher contributions. The new law allows optional early retirement for employees who have contributed for at least 25 years, compared to 20 years in the previous law.
Employers who refrain from paying their contributions will be subject to penalties of six months imprisonment and fines of between LE20,000 and LE100,000, compared to LE20,000 in the previous law.
To avoid what he said were many loopholes in the new law, Farghali said he hoped that Minister of Social Solidarity Nevine Al-Kabbaj would meet pensioners’ representatives soon.
He said that discussion could lead to acceptable results for all and that controversial issues could be revised in the law’s executive regulations that are yet to be issued.
*A version of this article appears in print in the 6 February, 2020 edition of Al-Ahram Weekly.