CAIRO: A senior finance ministry advisor said on Wednesday that the controversial draft pensions and social insurance law was about to be finalized and presented to the PA.
Mohamed Ahmed Moeed, senior advisor to the Minister of Finance for pensions and social insurance, said that the government plans to introduce legislation that allow the investment of up to 25 percent of pension funds’ surplus in equity and other traded securities.
The new system, he said, will secure no less than LE 100 per month for every citizen over 65, even those who have never worked.
Citizens whose social insurance money is deducted from their salaries should commit to this pension scheme throughout their careers and not just before they retire “because under the new law, the pensions will be set according to the accumulated salary, not to the salary earned in the final year before retirement, as the current law stipulates.
“The new law is meant to help the lower income brackets, but those who can afford it should pay for their pension. We want the public to benefit from the increase in our GDP, Moeed told Daily News Egypt.
Moeed told Reuters that Egypt’s state pension system was one of the most expensive in the world, with contributions assessed at 41 percent of basic income.
This change will give the government more flexibility in the investment of pension funds’ monies, compared to their current investment in public infrastructure projects.
He added that the National Social Insurance Authority would be able to invest the surplus funds and interest on its existing assets in the stock market, in real estate or directly in new or existing commercial enterprises, including industry, agriculture and construction.
The Ministry of Finance is seeking parliament’s approval by the end of the year.
Commenting on the proposed changes, Beltone Financial said it expects that the “increased liquidity in the stock market, created by the injection of the pension funds’ surplus, could increase market depth and, possibly, activate trading in small and mid-cap stocks, some of which have been performing well, recently, reflecting the expansion of growth in Egypt to further sectors.
Now, less than LE 2 billion [less than 1 percent of pension funds’ surplus], are being invested in equity, but those investments are generating a 23 percent return over the last three years, said Moeed.
The pension fund surpluses accumulated over the years and deposited with the government s National Investment Bank (NIB) are now worth about LE 250 billion.
Last month independent MPs accused Finance Minister Youssef Botrous Ghali of using the money from pension funds to narrow the budget deficit in violation of the constitution.
Al Ahram Weekly had reported that one leftist MP from Alexandria criticized the NIB for failing to invest pension finds in high-return development projects and offering merely 2 percent interest rates at a time when the interest rates of commercial banks were above 11 percent.
A Muslim Brotherhood MP was also quoted as saying that Ghali s capture of pension funds and National Organization for Social Insurance and Pensions (NOSIP) was itself in violation of articles 7, 17, 27 and 34 of the constitution, which describe pension funds as private money which the government must ensure will go to the best interests of pensioners and retired people.
As for the medical insurance system that is also undergoing major changes, Moeed said the new medical insurance law, one of the most controversial draft laws of last year, will be adjusted to suit the ministry’s budget.
The law was first proposed by the Health Ministry but was rejected by Ghali on the grounds that the treasury did not have the funds to finance it.
Although officials had announced that it will be discussed at the PA in March, it has not yet been presented to the assembly.
While the Health Ministry argues that the new medical insurance law is meant to raise the quality and services provided by public hospitals and cater to the needs of all social classes, the political opposition, however, believes that the proposed changes are a step towards the privatization of healthcare.