Riyadh’s national pension scheme has a serious hole in its finances, thought to be to the tune of approximately $213 billion.
Around one in three Saudis presently elect to retire following just a couple of decades in employment [AIAOU/Corbis/Getty]
Saudi authorities are mulling changes to the way pensions work in the kingdom, forcing nationals to put more money in and stay in employment for longer.
Riyadh’s national pension scheme has a serious hole in its finances, thought to be to the tune of approximately $213 billion, Bloomberg reported on Tuesday.
The kingdom is, therefore, mulling whether to raise the age of retirement, three knowledgeable sources told the business-centred news agency.
Saudis may additionally have to give more of their income over to the body that administers pensions, according to these same informed sources.
Known as the General Organization for Social Insurance (GOSI), it looks after private schemes in addition to state ones.
A senior figure there, Nader Al-Wahibi, the assistant governor for insurance affairs, took to official TV lately to caution about the risks to pensions.
He claimed: “The people that are retiring early now are going to drain all of the money in the fund.
“They’re living longer, and the money isn’t enough, even if we achieved astronomical investment returns.”
Saudis can currently expect to live to 75, while the nation’s age of retirement is currently set at about 60.
For women, this is after a 2019 increase of 5 years.
However, Bloomberg said, around one in three presently elect to retire following just a couple of decades in employment, meaning some give up their jobs while still in their forties.
The effective leader of Saudi Arabia, Crown Prince Mohammed bin Salman, could come under fire if he decides to tighten up eligibility.
His move to lift the country out of oil dependence while plugging holes in the kingdom’s finances due to the collapse in that commodity’s value has been substantial and includes levying taxation and reducing state financing.
Those of poor and average means have found this difficult to deal with, especially given Covid-19, which increased the rate at which adjustments have been made.
Saudi Arabia slammed the United Arab Emirates on Sunday for blocking an agreement to help cool down oil prices at a meeting for oil-producing countries and allieshttps://t.co/YZwVusjApc
— The New Arab (@The_NewArab) July 7, 2021
Bloomberg said GOSI, replying to a question about the possible pension adjustments, discussed the June decision to combine the state and private pension, as well as insurance, pots.
The pensions body asserted that this is not going to impact “the insurance entitlements of the insurance clients, the pensions for the retirement clients, or the percentages or supply of subscriptions for each fund, nor its operations or transactions”.
No ultimate determination on if the alterations should go ahead or what exactly they should look like has been reached, Bloomberg’s informants noted.
This latest news on the Saudi economy comes amid a spat with the UAE over OPEC+ oil output cuts.
Last week, the Emirates consented to a staggered increase in production of around 2 million barrels a day between August and December.
However, it rebuffed the idea of continued production cuts until the end of next year, after its scheduled April conclusion.