Seychelles Pension Fund – Increase to the personal contributions of workers and employers |12 April 2022

Mr Hoareau (second from right, anti-clockwise) accompanied by other board members during the press conference yesterday (Photo: Thomas Meriton)

Inevitable increase to ensure pension fund’s long-term sustainability

By Roland Duval

Increase in the personal contributions of workers and employers toward the Seychelles Pension Fund was the recommendation of the last actuarial valuation exercise in 2018, enabling the Seychelles Pension Fund (SPF) to be more sustainable, chairman of the Board of Trustees Marc Hoareau has said.

He was referring to the increase in the contribution as from April 1, 2022 and also the age adjustment of 65 years for pensionable age as from January 1, 2023.

An actuary is a firm, or individual appointed by the trustees of an occupational pension scheme to carry out actuarial valuations and advise on funding matters.

It was on April 6 that the cabinet of ministers approved the increase in the SPF rate

As per the changes, the increase in contribution rate for employees is from three (3) percent to four (4) percent effective as of April 1, 2022, while the contribution rate will further increase to five (5) percent as from January 1, 2023.

As for employers, the increase in contribution rate has gone up from three (3) percent to five (5) percent, effective as of April 1, 2022 only.

In the case of pension contribution for self-employed, it has increased from six (6) percent to nine (9) percent, also effective as of April 1, 2022, and will increase to ten (10) percent as from January 1, 2023.

These changes will reflect in the amendment of the Seychelles Pension Fund (Membership and Contributions) Regulations.

Cabinet also maintained its position to raise the retirement age for SPF pension purposes from 60 to 65 years old as from January 1, 2023, while also introducing an early retirement mechanism for retirees in the age bracket of 60 to 64 years old.

The cabinet advised that the SPF explore additional strategies to continue increasing contributions into the Fund to ensure its long-term sustainability.

It has also been agreed by the cabinet that the SPF would set up a mechanism for Seychellois living overseas, who are not presently members of the Fund, to be able to contribute to the Pension Fund.

Mr Hoareau explained that following the 2018 actuarial valuation exercise, the previous board did ask the previous cabinet to approve the increase, but the demand was not materialised.

He said with the present situation, it is inevitable to avoid the increase, as it gives the Fund the adequate capacity to rebuild itself for a much solid ground.

He explained that at the moment, the Fund is paying out more than it is collecting and that, he said, is putting a lot pressure on the SPF’s investment plan, precisely from the amount of income being generated from properties.

Digging deeper in the savings generated from the investments is not a good sign towards sustainability of the Fund, he explained.

Regarding Seychellois who have previously worked in the country, but later decided to pursue their careers abroad, their processes are still ongoing, as long as they make their regular monthly contributions, while those abroad who have never been a member, the SPF is still working on a framework on how to absorb them onboard.

Regarding foreigners on Gainful Occupation Permit (GOP), Mr Hoareau explained that as much as the idea is welcomed, and will benefit the Fund in the short term, there are various legal implications involved on possible policies.

In terms of consultations prior to the decision, it has been explained that stakeholders, including Citizens Engagement Platform Seychelles (Ceps), the Seychelles Chamber of Commerce and Industry (SCCI), the Central Bank of Seychelles (CBS) among many others were consulted during the process which began in October last year.

In regards to the pension of constitutional appointees, Mr Hoareau explained that it does not come from the SPF as it has been speculated, but it is rather constitutional, coming directly from the taxpayers’ money.