1. Non Contributory Pension for the Elderly in Lebanon Mounir Rached, Ph.D. Vice president, LEA May 31 st, 2012 1

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

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 3

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5. 2. Lebanon’s Social Security Scheme-NSSF Mandatory 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

6. NSSF Total cost 23.5% of wages Relatively very expensive Share of employer (91%) is very high Induces fraud- damages credibility of scheme 6

7. 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

8. NSSF Cont. Health segment is in deficit Subsidized by government: USD 100 million in 2012 8

9. 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

10. Lebanese Universities Lebanese Universities (not comprehensive)  Contributions : 5-11% of employee’s earnings –  Benefit: end of service indemnity-one month for each year 10

11. Private School’s Solidarity Pension Fund  Annuity option – up to 85% of last salary  Indemnity Benefits:  1 month salary for 1 st 10 years  2 months salary for each of the following 20 years,  3 months salary for each year beyond the 1 st 30 years.  Health benefits 11

12. Cont.  Contribution:  6% of salary by members,  6% contribution by the school  B. The solidarity fund is a health and services plan. 12

13. Syndicates Schemes  Lawyers, engineers, physicians, pharmacists, etc.  Defined percentage contribution  Benefit: pension & health 13

14. 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

15. Target Targets low income groups by elimination 15

16. 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

17. 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

18. 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

19. 3. Cont..  Improve Housing  Ensure Agricultural development  Reduce rural-urban migration  Responsible for Changes in social roles.  Redistribute Regional income 19

20. 4. Budgetary Implication 20 Population above 60 years old by age group, 2006, 2011 Age Group 20062011 60-64112,736124,148 65-6997,813102,301 70-7477,87782,973 75-7952,08359,068 80-8428,11032,903 85+16,09917,434 Total 60-85+384,718418,827 Total 65-85+271,982294,679 Total population3,784,7794,055,922 60 + as percent of total10.16 %10.32% 65 + as percent of total7.2 %7.3% Source: H.A Abou Rizk, Population Conditions in Lebanon, 2003

21. 21 Option I: Full Coverage for 65+based on 2011 data Pension per person Monthly USD Pension per person Annual USD Pension per capita GDP (%) Total cost per annum USD (000) % of GDP 75% of min wage 337.54,05038.1181,193,4492.8 50% 2252,70025.412795,6331.9 30% 1351,62015.247477,3791 Total pensioners294,679 Percent of population7.3 Minimum wage-USD450 GDP 2011 USD(000)42,500,000 Population4,000,000 Per capita GDP USD10,625 Expenditure/GDP31%

22. 22 Option II: for 65+ Pension per person Monthly USD Pension per person Annual USD Pension per capita GDP (%) Total cost per annum USD (000) % of GDP 75% of min wage 337.54,05038.1888,6222.1 50% 2252,70025.4592,4151.4 30% 1351,62015.2355,4490.8 Total pensioners 294,679 Percent of population 7.3 Minimum wage-USD 450 GDP 2011- USD(000) 42,500,000 Population 4,000,000 Per capita GDP 10,625 Deductions: Civil service security 25466 49800 Net beneficiaries 219,413

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25. Option V for 70+ Pension per person Monthly USD Pension per person Annual USD Pension per capita GDP (%) Total cost per annum USD (000) % of GDP 75% of min wage 337.54,05038.16211841.5 50% 2252,70025.44141231.o 30% 1351,62015.2248,4730.6 Total pensioners 192,378 Percent of population 4.8 Minimum wage-USD 450 GDP 2011- USD(000) 42,500,000 Population 4,000,000 Per capita GDP 10,625 Deductions: Civil service beneficiaries 27,163 Syndicates 4,028 Residency requirement (5%) 7,808 Net beneficiaries 153,379 25

26. 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 26

27. 6. Administrative Arrangements Integrated within the MOF 27

28. 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 28