According to a study by the “Finabi” office for financial consulting and solutions:
father-in-law
The financial consulting and solutions office, “Finabi Konsai,” proposes a solution that it considers radical to the imbalance and deficit of the National Retirement Fund, which is based on reinjecting the proceeds of the public income tax related to pensions into this fund, to breathe it and gradually restore balance to it.
The office revealed, in a new study, published on Tuesday, that the financial position of the National Retirement Fund remains fragile in the medium and long term, based on a forward-looking study of the fund’s accounts published by the Authority’s General Directorate in 2021, which showed the fragility of financial balances and the continued widening of the funding gap.
Pumping comprehensive income tax revenues from pensions into the fund to rebalance
According to the same data, based on the assumption of an annual increase in pensions by 4 percent, compared to the growth of subscription revenues by only 2 percent, the fund’s financing needs were expected to reach about 700 billion dinars in 2022.
The study added that the deficit would have worsened to reach about 900 billion dinars in 2025, before jumping, according to the same estimates, to about 1,200 billion dinars in the year 2030, which reflects the amount of pressure facing the retirement system in Algeria.
Finabi Konsai proposes a financing mechanism that he considers simple and effective, based on transferring all the tax revenues generated from retirement pensions, represented by the tax on gross income, into a special allocation account directed exclusively to restoring the financial balance of the National Retirement Fund.
The office believes that this formula is based on the principle of directing permanent resources to cover permanent needs, allowing for the establishment of more stable financing for the fund, while achieving a significant social impact by ensuring the continuity of pension disbursement and improving the authority’s financial vision.
The study considered that resorting to borrowing or adopting temporary additional contribution mechanisms does not achieve the required operational efficiency, and does not provide sustainable solutions to the financing crisis that the Fund is experiencing.
In terms of structural reforms, the office stressed the need to reduce unemployment rates, explaining that the financial balance of the retirement system requires the presence of at least four participants for every one retiree, while the current rate is close to only two participants per retiree.
He also called for tightening the fight against unauthorized work and incomplete declarations of wages, allowing for the expansion of the base subject to contributions and raising the mass of contributions directed to the Fund.
Among the recommendations also is to accelerate the launch of the supplementary retirement system, giving the social insured the possibility of improving their purchasing power in the future by benefiting from an additional pension.
The office concluded its proposals by calling for adapting the Algerian retirement system to the models adopted globally in systems based on the principle of distribution, in a way that ensures the sustainability of funding and greater justice between generations.
