The pension system in Morocco faces several challenges and risks, mainly related to the sustainability of its reserves and its ability to continue to play its economic and social roles in the context of a structural crisis affecting its structures, its management and its future prospects.
Awareness of the seriousness of the situation of the pension system has become present among the various actors and stakeholders, in particular the government, which has undertaken several reforms to this effect to limit the deterioration of the financial situation of this system and to try to to lay the foundations for a structural reform to rebalance its multiple funds.
In this sense, the Observatory of Government Work (OTRAGO), has published its report on pension funds in Morocco, giving an idea of the situation, the measures taken by the government and the actors concerned, as well as its observations and its recommendations to this effect.
Thus, OTRAGO recalls in its report that since 2013 already, the government has set up a national commission in charge of reforming pension systems, which has worked on the development of a roadmap to reform this system.
The main recommendations of this commission include the creation of a pension system with two poles, public and private, the implementation of graduated reforms for the civil pension system which will allow to postpone the horizon of the sustainability of the system of 2022 to 2028, as well as the creation of a pension scheme for non-employees, the report says.
Since 2016, the government has started to implement the recommendations of the national commission in charge of the reform of the pension systems by putting in place gradual reforms which include the gradual increase of the retirement age to 63 years. , the increase in the contribution of workers from 20% to 28%, the setting of the pension on the basis of 2% instead of 2.5% as well as the liquidation of pensions on the basis of the average of the salaries of the eight last years of effective service.
In sum, the pension system in Morocco is facing significant challenges, but the government has undertaken reforms to remedy this situation and ensure the sustainability of this system in the long term, notes the report.
However, these measures have not yet solved the crisis in the pension system and a new approach to reform has been adopted under the current government, the report points out, which explains that this new approach consists of involving all stakeholders, in particular the trade unions and professional organizations in the reform process.
A commission has been set up to develop reform scenarios in consultation with all stakeholders and a report will be presented in May 2023.
Situation of pension funds in Morocco
To better understand the situation of our pension funds, the OTRAGO has given in its report an overview of its funds. Regarding the Moroccan Pension Fund (CMR), and although this fund is currently in balance in terms of acquired rights (68 billion dirhams of reserves, 7.8 billion dirhams of deficit) after the systemic reform, OTRAGO estimates in its report that the fund will deplete its reserves by 2028 mainly due to the current amount of debt implicit in rights acquired in the past. The fund will need 14 billion dirhams per year to continue to fulfill its obligations, said the same source.
Concerning the collective retirement salary scheme, and although this fund suffers from a technical deficit of approximately 3.3 billion dirhams, its durability remains long and should last until 2052, mainly due to its high level of reserves (135 billion dirhams), which allow it to offset the deficit with significant financial income, the report points out.
As for the National Social Security Fund (CNSS), the report reveals that the technical deficit of this fund (375 million dirhams) remains low compared to its reserves (61 billion dirhams), and its sustainability should go until 2038. The system of this fund allows the integration of significant margins for systemic reform, in particular for the increase in the contribution rate (11.89%) and the retirement age currently limited to 60 years , supports the report.
The social dialogue which has still not resulted in a consensus
To accompany the debate on the reform of the pension funds, proposals were discussed during social dialogue sessions including several important changes, in particular the adoption of a uniform ceiling for the basic scheme equivalent to twice the minimum wage in the public and private sectors, as well as the adoption of a compulsory and optional supplementary pension for those who can afford it.
The reform also involves removing the percentage ratio and replacing it with points, the report points out, as well as calculating the pension based on length of service rather than salary for the past eight years. Other measures, which the unions do not intend to accept, include raising the retirement age to 65, including in the private sector, and raising contributions, including in the private sector.
What OTRAGO offers
In its report, OTRAGO first highlights the positive aspects of the government’s approach to reforming the pension systems, in particular the inclusion of this issue on the social dialogue agenda and in the agreement of the April 30, 2022, as well as the involvement of economic and social stakeholders in decision-making.
However, OTRAGO raises several problems and shortcomings in the proposed scenario, in particular the lack of transparency on the part of the government concerning the results of the study carried out by the consulting firm on the reform of pension systems, as well as the lack of clarity as to the supplementary pension system and its compulsory nature for certain categories.
The report also highlights the responsibility of the state in the crisis of pension funds and stresses the importance of reassessing the investments and the use of the reserves of these funds, pointing the finger at the absence of dialogue by the government concerning this reform, and limit the debate within the social dialogue sessions, instead of opening a social debate on this strategic and fateful dossier for large sections of Moroccan society.
In this sense, the Observatory proposes that the state assume its responsibilities in the non-payment of its debts from 1959 to 1997, which caused a loss of return of more than 25 billion dirhams.
It is also necessary, according to OTRAGO, to adopt a gradual reform over a period of at least 10 years to ensure a comprehensive and lasting reform, and to review the laws governing the management of pension fund reserves to increase their yield to at least less than 8 or 9% per year and improve their contribution to the financing of the national economy.
It is also recommended to abolish the exception of the CNSS in the management of its reserve funds, which will make it possible to increase its output and solve the problem of the deficit, and to adopt global and synchronized reform orientations for all the systems. pension, the compensation fund and the tax system, in particular with regard to income tax for the self-employed and employees, as well as improving the national tariff reference to ensure that the reform does not affect purchasing power of retirees.
Also, OTRAGO proposes to exempt workers and employees over the age of 55 from any future reform, with a preference for young workers, and to set up a minimum retirement wage of at least 1800 dirhams per month, to preserve the purchasing power of low-income workers.
It is also recommended to relatively increase the ceiling of the basic scheme to calculate the proposed retirement allowances, taking into account the earning capacity of workers, while establishing bridges between public and private pension systems to facilitate the mobility of workers active on the labor market from the public sector to the private sector or vice versa.
Ultimately, OTRAGO recommends putting an end to the waste of time in the implementation of the reform by 2024 at the latest, and developing framework legislation that clarifies the roadmap for the reform of pension systems and which applies to all, individuals, companies and governmental and private sectors.