Ministry explains rationale for increasing retirement age to 65 |05 April 2023

Ms Tamatave and Mr Palit during the press conference (Photo: Patrick Joubert)

The Ministry of Finance, National Planning and Trade has explained the rationale for increasing the age for social security retirement benefit from 63 to 65 years.

The Statutory Instrument (SI) 137 (2022) which provides for the social security age to be increased from 63 to 65, in accordance with Section 64 (2) of the Interpretation and General Provisions Act, was released in December 2022. It took effect as of January 1, 2023.

A Seychellois having resided in the country for not less than 12 years after the age of 18 is eligible for the social security fund benefits.

Speaking to the press yesterday afternoon at the ministry’s headquarters, Liberty House, Lenny Palit, director general National Planning, said that it all boils down to the fact that our population, with a high life expectancy, is ageing at an alarming rate (20%).

He noted that the would be next generation of contributors of income tax are not enough to sustain the social security fund given that the country has a low birth rate and a large portion of our workforce who could contribute to sustain the fund are in non-formal employment (8024), including a significant group of capable people (4300) who are on drug treatment, among other socio economic problems the country is facing.

Although entitled under the law for retirement benefits, those two groups of people are contributing nothing to the social security fund or even towards their own pension benefits.

The current amount of social benefit is R5750, payable per month to any Seychellois reaching retirement age of 65 years and it does not take into account whether the person was in employment or not.

The fund put in place to alleviate poverty once in retirement does not cater for Seychellois living abroad.

Mr Palit said that as per the country’s current demographic, the group of young dependent (under 15 year olds) is practically very small compared to the working age group (22-65 years) among which a large group of 5000 will go on retirement in the coming 10 years.

He explained that a smaller portion of our future workforce clearly indicates an increase in budget expenditure for old care as a result of our ageing population.

He noted that given the large number of people who will be retiring in ten years’ time and beyond, it will put pressure on the social security fund which would mean that the young group will have to pay more taxes to sustain the fund.

He added that the measure being put in place is to mitigate some of the impacts on the future workforce.

He said that if everything stays as is, things will get worse in 10 years’ time and will worsen in 20 years’ time if nothing is done to find the money to cater for the number of people who will be on retirement, including those who are in non-formal employment and those on drug treatment who are entitled for the benefit even though they have not made a single contribution into the fund.

The comptroller general, Astride Tamatave, who was also present at the press conference, said the retirement benefit spending in 2016 accounted for 47% of total income tax for that period contributed by the working population to increase to 68% in 2017.

She stated without the reform (63-65 years), in proportion to the total income tax spending for 2023 which now stood at 71% would have reached 80%.

She added that nonetheless the 71% in tax spending for this year is still a significant amount.

She noted that the budget for retirement benefit for 2023 is R840 million.

Given the limited workforce from the next generation, Ms Tamatave said that apart from a change in age for social retirement benefit, other exercises are being tabled as ways to make the fund sustainable for the future.

“Among the exercise is whether it makes sense for everybody, although eligible, to earn the R5750,” said Ms Tamatave, who was referring to people earning big salaries.

Patrick Joubert