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Lebanese Economic Association International Development Research Center-Canada

Lebanese Economic Association International Development Research Center-Canada. Non Contributory Pension for the Elderly in Lebanon Mounir Rached, Ph.D. Vice president, LEA May 31 st , 2012. Contents. Motive & objective Current Social Security Schemes

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Lebanese Economic Association International Development Research Center-Canada

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  1. Lebanese Economic AssociationInternational Development Research Center-Canada Non Contributory Pension for the Elderly in Lebanon Mounir Rached, Ph.D. Vice president, LEA May 31st, 2012

  2. Contents • Motive & objective • Current Social Security Schemes • A Non-contributory scheme for the elderly

  3. I. Objectives • Secure a social safety scheme for the elderly • 80% of elderly 65+ don’t have any pensions • Vulnerable segment- depend mostly on donations/family support • Prevalence of poverty among elderly

  4. 2. Lebanon’s Social Security Scheme-NSSFMandatory • NSSF Branches: employer Contribution • Health & Maternity Insurance (HMI) 7 % • Family & Educational Allowances (FEA) 6 % • End of Service Indemnity System (ESI) 8.5 % • Employee contribution 2 %

  5. NSSF • Total cost 23.5% of wages • Relatively very expensive • Share of employer (91%) is very high • Induces fraud- damages credibility of scheme

  6. NSSF-Indemnity benefits (ESI). • At retirement • Lump-sum payment • 1 month/year of service up to 20 years • After 20 years of service, 1.5 months /year of service. • Health scheme is terminated • All benefits stop

  7. NSSF Cont. • Health segment is in deficit • Subsidized by government: USD 100 million in 2012

  8. Public Sector pension • Generous but unsustainable pension scheme • budget cost contribution: 3.2% of GDP • Public employees’ contributions : 6% of wages • Accrual benefit rate per year: • Civil Servants: 2.13% • Military pensions: 2.66%

  9. Lebanese Universities • Lebanese Universities (not comprehensive) • Contributions : 5-11% of employee’s earnings – • Benefit: end of service indemnity-one month for each year

  10. Private School’s Solidarity Pension Fund • Annuity option – up to 85% of last salary • Indemnity Benefits: • 1 month salary for 1st 10 years • 2 months salary for each of the following 20 years, • 3 months salary for each year beyond the 1st 30 years. • Health benefits

  11. Cont. • Contribution: • 6% of salary by members, • 6% contribution by the school • B. The solidarity fund is a health and services plan.

  12. Syndicates Schemes • Lawyers, engineers, physicians, pharmacists, etc. • Defined percentage contribution • Benefit: pension & health

  13. 3. A Non-contributory scheme for Lebanon- Background • Non-contributory pensions provide adequate protection for low-income and poor rural residents • 40% of income per-capita/75% of minimum wage • Is complementary to the current Lebanese Social security scheme or revised scheme.

  14. Target • Targets low income groups by elimination

  15. 3. Cont. • International Experience: • Argentina : • Reduced household poverty rate by 31% • Reduced extreme household poverty rate by 67% • Costa Rica: • The economic status of 15% of beneficiaries has been improved

  16. 3.Cont.. • Bolivia: • Beneficiaries increased food consumption 165% • Brazil • 80 to 90% of rural beneficiaries’ households, social security benefits were responsible for at least 50% of the monetary household income

  17. 3. Cont.. Based on International Experience, the Non-Contributory Scheme is able to provide the following; • Alleviate Poverty • Provide Access to and substitution of social services • Promote the quality of life • Support of the local economy.

  18. 3. Cont.. • Improve Housing • Ensure Agricultural development • Reduce rural-urban migration • Responsible for Changes in social roles. • Redistribute Regional income

  19. 4. Budgetary Implication Source: H.A AbouRizk, Population Conditions in Lebanon, 2003

  20. 5. Financing • From the budget through stream- lining expenditure • Transfers in 2012; LBP 3,728 billion = USD 2.4 billion • Pension cost (70+) USD 622 million 25% of transfers 2.5% of total government expenditure in 2012 4.2% of revenues

  21. 6. Administrative Arrangements • Integrated within the MOF

  22. 7. Health services • Government health services through pub. hospitals • Private schemes $ 70 to $ 80 annual cost • Government’s global health insurance plan • Separate health and pension schemes

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