Finance and Economic Development Committee Organizes Colloquium on: “Sustainability of Pension Schemes in Light of Generalization of Social Protection”

As part of following up the implementation of the social protection project and in pursuance of the High Royal Instructions, especially those relating to the pension scheme, and taking into account its shortcomings and the approaches adopted by previous Governments, which did nothing but delay the reveal of the financial deficit of the concerned Funds, the Finance and Economic Development Committee organized a colloquium on: "Sustainability of Pension Schemes in Light of the Generalization of Social Protection," on Wednesday, February 23, 2022.

This colloquium was an opportunity to raise questions about the course and outcome of the pension schemes, with a view to guaranteeing their sustainability under the generalization of social protection, making this Royal Project success and, therefore, meeting the challenges in that connection.

The colloquium was chaired by Mohamed Chaouki, Chairperson of the Finance and Economic Development Committee, with the presence of Ms. Nadia Fettah Alaoui, Minister of Economy and Finance, Mr. Fouzi Lakjaa, Minister Delegate to the Minister of Economy and Finance in charge of Budget, and officials from the Economic, Social and Environmental Council (CESE), the Moroccan Professional Pension Fund (CIMR), the Moroccan Pension Fund (CMR), the National Social Security Fund (CNSS), the Supervisory Authority of Insurance and Social Welfare (ACAPS), and CDG Prévoyance.

The event, hosted by the House of Representatives, provided a special occasion for the participants to diagnose and analyze the reality of the pension scheme in our country, highlighting its inconsistencies, both in terms of technical and demographic characteristics, as well as in the nature of the problems it encounters. The differences noticed in this scheme vary between the various existing funds: funds that are expected to be depleted by 2028; funds that register a technical deficit since 2020 regardless of their essential reserves; as well as the funds that have a relatively far-off sustainability prospect.

Moreover, the colloquium was also an opportunity to review the results of the efforts made by the Government to solve the problem of the pension scheme in our country, namely after the establishment of the National Commission for the Reform of Pension Schemes and the setup of the General Framework for the Reform of the Pension Scheme, which aim to create two pension poles, one for the public sector and the other for the private sector, following the promulgation of the Framework Law on Social Protection.

The participants in the colloquium agreed on the importance of reforming the pension scheme following a participatory approach, with openness to social actors and considering the financial constraints of the reform, in a way that guarantees the balance, continuity and sustainability of the scheme.

The meeting was also marked by the presentation of findings and suggestions brought about by the participants, particularly the following:

- Work on redressing the current situation of the civil pension scheme after the 2016 standard reform;

- Work on enabling the Collective Pension Allocation Scheme (RCAR) to overcome its technical deficiency.

- Acceleration of the efforts aimed at strengthening the balances of pension activities and ensuring the convergence of services, funding and regulatory framework;

- Organization of the scheme into two poles: A public pole (RCAR-CMR), and a private pole (CNSS-CIMR), in sight of a consolidated national scheme that is built upon three pillars:

• Compulsory, which will be managed following a distribution rule that includes the employees of the public and private sectors, as well as independent workers;
• Supplemental, which will be based on the principle of contribution for incomes that exceed the determined cap;
• Optional, which will be capitalization-based under individual or group private insurance.

- Establishment of effective governance and leadership mechanisms  of pension schemes to ensure their sustainability;

- Establishment of principles of participatory governance and transparency based on a clear separation between the powers of strategic orientation and leadership and those of management, while ensuring the legitimate and effective representation of economic and social partners within the governing and leadership bodies, as well as in the formulation and evaluation of investment policies and the use of financial reserves;

- Imperative of taking into account the funding capacities of employers and the contribution capacity of the members of the funds;

- Reconsideration of the policy of the use of funds derived from reserves, and adoption of a unified approach to aspects relating to the aspired objectives and impacts, management and control, and promotion of long-term investment;

- Creation of a minimum wage in old age that should not go below the poverty threshold for persons who do not benefit from a pension under the comprehensive reform of the scheme;

- Expansion of innovative financing across all funds;

- Standardized reform of the RCAR and the adoption of reform through the amendment of regulatory texts, given its positive impact on the sustainability of the scheme, with an increase in the retirement age or membership fees;

- Adoption of a standardized reform at the level of the RCAR, given its substantial additional input to the sustainability prospect for this scheme;

- Possibility of introducing standardized reforms at the level of the National Social Security Fund (CNSS), given the latter's margins as its contribution rate is at 11.89% and the retirement age is set to 60 years old.

- Consolidation of sustainability by integrating new processes based on sound technical grounds to ensure balanced tariffs;

- Investment of newly obtained resources according to the best risk management criteria;

- Proactive compatibility of the management apparatus with the capacities of existing schemes.