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New entrants to the job market now have a higher retirement age: Fresh grads and other working individuals who have less than 20 years of work experience will now be subject to new rules for retirement and pensions after the government passed a new Social Ins. Law last week. Under the new rules, the retirement age at which these employees can retire with full pension benefits will now be between 58-65 years, according to the General Organization for Social Ins. (GOSI). The previous retirement age was 60.
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Who the rules apply to: All those who are younger than 50 Hijri years old and have paid into the pension scheme for less than 20 years will be subject to the new rules, GOSI said. Those who are subject to the new rules can retire 10 years earlier than the statutory age as long as they have been employed for at least 30 years, and will take a pension haircut in exchange for the earlier retirement, according to GOSI’s website. The changes apply to both public and private sector employees.
Who’s exempt: The new rules do not apply to anyone who are more than 50 Hijri years old, or have paid into the pension scheme for 20 years or more, GOSI said.
How the change will be implemented: The higher retirement age will be introduced gradually at four-month increments, with the youngest employees currently in the job market subject to the highest retirement age, according to GOSI. For example, those who are currently 48-48.5 years of age will now have a statutory retirement age of 58 years and four months. Those aged between 47-48 will see their retirement age set at 58 years and eight months, and those aged between 46-47 will now retire when they are 59. For employees currently below 29 years of age, the retirement age will become 65.
SMART POLICY- Raising the retirement age is expected to create a more sustainable system for pensioners, particularly as the country currently has a largely young population, Mercer said in its Global Pension Index (pdf) last year.
Pay-in structure + pension calculations are also getting a shakeup: Public and private sector employees will now see their national ins. contribution rates rising 0.5 percentage points each year for four years, according to GOSI’s website. The rules will also tack on an extra 0.75% deduction, bringing the total amount contributed from the subscription wage to 11.75%. Employers will also pay an additional 13.75% per employee. This increase will come into effect one year after the new law was passed. Pension payouts will now also be based on 2.25% of each individual’s average monthly earnings (down from 2.5%) over the course of their subscription to the pension system, Okaz reports.
