On February 1, a new noncontributory pension program went into effect that provides a monthly pension of up to MRF2,000 (US$156) to all resident Maldivian citizens aged 65 or older. (The pension is reduced by an amount equal to 50 percent of all other pension income received). The program, called the Old-Age Basic Pension, represents the first of a two-stage pension reform law ratified by parliament in May 2009. The second stage—which will come into effect in May 2010 for public-sector workers and at a yet-to-be-determined date (expected no later than May 2011) for private-sector workers—will introduce a defined contribution (DC) program called the Maldives Retirement Pension Scheme. Previously, only public-sector workers had a pension program.
The Maldives Retirement Pension Scheme will be mandatory for public- and private-sector workers and voluntary for informal-sector workers. The program will be funded by a total contribution of 14 percent of salary split evenly between employers and employees. (Employers can also choose to contribute the entire amount with no employee contribution). To qualify for a pension, workers must be aged 65 or older, or aged 55 or older with sufficient funds in their accounts to provide for a monthly annuity that is at least twice the amount of the Old-Age Basic Pension. At retirement, a worker's accumulated contributions and investment returns (minus administrative fees) will be converted into an annuity based on projected life expectancy. For public-sector workers aged 62 or younger, the value of their accrued rights under the old public pay-as-you-go system will be calculated as a lump-sum amount and transferred to their account in the new system; public-sector workers aged 63 or older will remain in the old system.
The Maldives Pension Administration Office (Pension Office) is responsible for administering the two new programs. The governing board of the Pension Office, under the supervision of the Pension Supervision Department of the Capital Market Development Authority, is charged with investing the funds from the new DC program.
Sources: "Old-Age Pension," Maldives Pension Administration Office, 2009; "Retirement Pension," Maldives Pension Administration Office, 2009; "New Maldives Pension System: Frequently Asked Questions," Capital Market Development Authority, July 30, 2009.