Bahrain rejects controversial retirement and pensions shake-up

Proposal would have handed government department authority over retirement age and payouts

Lawmakers in Bahrain have rejected a contentious proposal that would have handed a government department widespread powers to determine the retirement ages and pension benefits of huge swathes of the country’s public sector.

The Council of Representatives voted 37-3 against the law, which would have seen the Social Insurance Organisation (SIO) given the authority to determine the pension payouts and retirement age of government, military and other public sector employees.

Council representatives said the bill “deprived MPs and Shura Council members of their powers, which are granted to them by the Kingdom’s constitution, to legislate and supervise.” A fractious debate on the bill had to be rescheduled after insufficient MPs turned up to vote on its initial reading.

The vote was dubbed the “most significant” in the four-year history of the current Shura Council and was portrayed by some as an attempt to shift important powers for determining pension levels to a non-elected authority.

But despite the rejection of the law, the issue of pensions and retirement age is unlikely to cease troubling the Bahraini authorities. Pensions are becoming an increasingly expensive cost to the public purse, at the same time as pensioners themselves complain their retirement pots are failing to keep pace with the cost of living.

Retirees who began drawing their pensions prior to 2010 have complained that the way their payouts are calculated leaves them worse off as they receive annual increases of around 3 per cent. A proposal in 2016 to raise this to 7 per cent was rejected by the House of Representatives.

In April, the Shura Council did approve a new set of rules that would allow private sector employees to purchase ‘virtual’ years of service so they would receive enhanced benefits when they retired. The average age of a private sector retiree in the country is 46, and their typical pension earnings are around 30 per cent below those of their public sector counterparts.

Bahrain has in the past considered the idea of raising the retirement age to 65 or more in an effort to reduce the costs of pensions, but these proposals have failed to gain popular support.

A plan in 2017 to ban expats over the age of 50 from working in the country was also rejected. The move would have been disastrous for Bahrain’s labour market, according to experts, forcing businesses to find additional sources of talent at relatively short notice.

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