On June 13, the Egyptian Parliament passed a pension reform law that will replace the current public pay-as-you-go(PAYG) pension system with a system of individual accounts on January 1, 2012. Specific regulations concerning the system are due before Parliament by the end of 2010. According to the Ministry of Finance, the reforms are intended to encourage greater savings for retirement and improve the pension system's long-term sustainability. In the coming decades, the Egyptian population is projected to age rapidly because of improvements in life expectancy (from 71.1 years in 2010 to 77.7 years in 2050) and declining fertility rates (from 2.68 children per woman in 2010 to 1.92 in 2050). As a result, the share of the population aged 65 or older is projected to increase from 4.6 percent in 2010 to 13.1 percent in 2050—an increase that would place significant strain on the existing pension system.
Key elements of the new system include the following:
The current public PAYG program in Egypt covers approximately 80 percent of employed persons, one of the highest levels among developing countries. Contributions are based on two components: (1) base earnings, or earnings up to 775 Egyptian pounds (US$136) a month, and (2) variable earnings, or earnings exceeding 775 Egyptian pounds a month plus certain other forms of compensation, including bonuses, incentives, and commissions. Employees contribute 13 percent of base earnings and 10 percent of variable earnings, employers contribute 17 percent of base earnings and 15 percent of variable earnings, and the government contributes 1 percent of earnings plus the cost of any deficit.
Article with courtesy of Social Security Online