Withdrawal of retirement savings approved to fund Hajj pilgrimage

Legal changes were approved on Wednesday to raise the limit of withdrawals from retirement savings to finance Hajj pilgrimages.

As pledged by President Ibrahim Mohamed Solih, the Pension Act was previously revised in March to allow workers enrolled in the retirement scheme to cover 50 percent of the cost of a first-time Hajj pilgrimages from their savings.

Further amendments were submitted in May to raise the withdrawal amount to cover 80 percent of the payment. The official rate set by the government is about MVR65,000 (US$4,215).

The bill was passed unanimously at Wednesday’s sitting of parliament with 70 votes in favour.

Despite the unanimous consent, MPs expressed reservations during the final debate, echoing concerns raised by pension office officials when the government-sponsored legislation was reviewed by parliament’s social affairs committee.

Athifa Ali, chairwoman of the Maldives Pension Administration Office, told the committee last week that deductions for reasons other than retirement pension payments would pose “a big challenge to the sustainability [of the scheme].”

According to the 2009 Pension Act, the primary objective of the contributory scheme was to ensure that individuals save during employment to provide for their livelihood in retirement. The law mandates a monthly contribution of 14 percent of the pensionable wage of the employee. Members can start to draw down at the age of 65.

In its report, the parliament committee recommended the creation of a separate voluntary scheme to save for Hajj pilgrimages.

According to eligibility rules made by the pension office, a member of the retirement scheme should have a balance of at least MVR336,000 in the savings account in addition to the collateralised amount. The figure is the minimum required to issue MVR2,000 a month when a worker reaches retirement age.

Some 6,000 people are reportedly eligible under the rules.

But the committee recommended raising the balance limit to MVR420,000. More than 3,600 people would still be eligible, it noted.

Performing the pilgrimage in Mecca at least once in a lifetime is obligatory upon all able-bodied Muslims.