The government has reversed its decision to end monthly allowances for newly retired public employees, ensuring the continuation of the double pension system despite growing fiscal challenges. The policy change, initially set to take effect on January 1, 2025, was reconsidered during a Cabinet meeting amid concerns about its impact on retirees who have long depended on the allowance.
Minister of Finance Moosa Zameer, who also chairs the National Pay Commission, explained the rationale for maintaining the system. “Many employees have relied on this allowance for years. Discontinuing it would cause significant inconvenience,” he stated.
Rising Costs and Fiscal Concerns
A 2015 special audit by the Auditor General underscored the financial strain of the double pension system, recommending reforms to harmonize state pensions. Without changes, the report projected pension-related expenditures could balloon to MVR 4.3 billion by 2030, threatening fiscal sustainability.
The current system, which lacks private contributions, is funded entirely by the state. This year’s budget allocated MVR 266 million for the scheme, with MVR 272 million planned for 2025 and an additional MVR 45.2 million earmarked for lump-sum payments to retirees in 2024.
International organizations like the World Bank and the International Monetary Fund (IMF) have echoed calls for reform, advocating the abolition of the double pension system to ensure long-term financial stability.
Agencies Operating Retirement Schemes
The retirement allowance system covers employees from various key government institutions, including:
- Police
- Defence Ministry
- Customs
- Judicial Service Commission
- President’s Office
- Department of Judicial Administration
- Prosecutor General’s Office
- Anti-Corruption Commission
- Maldives National University
- Parliament Secretariat
- Elections Commission
- Auditor General’s Office
- Civil Service Commission
Balancing Sustainability and Social Impact
While the financial burden of the system continues to grow, the government’s decision reflects a prioritization of social welfare over fiscal pressures. Minister Zameer highlighted the need to address the concerns of retirees who have long relied on the allowances, balancing economic reforms with public expectations.
The decision underscores the complex challenge of managing state finances while maintaining public trust, as stakeholders continue to call for sustainable pension reform that ensures fairness and fiscal responsibility.
