Pension reform: “There are alternatives to the TINAwalla-led narrative”

Interview: Nita Deerpalsing

‘When this regime decides to become unpopular with the “welfare state for the well-connected”, then we can talk about what real Courage means’

* ‘Mauritian households are paying a staggering Rs 2.7 billion annually to sustain the excessive profits of IPPs…
… amounting to an estimated Rs 80 billion over the course of a 30-year contrat en béton‘

* “I wonder if we have politicians who believe in a noble purpose”
‘Unfortunately, convictions cannot breathe under the weight of the envelopes of political contributions from the IPPs’

As the government’s pension reform proposals spark widespread debate, one important question arises: Was there truly no alternative? The Prime Minister’s assertion that the Basic Retirement Pension (BRP) has become “fiscally unsustainable and financially unbearable” has set the stage for sweeping changes — sparking anxiety, political backlash, and calls for clarity. In this interview, Nita Deerpalsing dissects the assumptions underpinning the current reform, challenges the idea that “There Is No Alternative” (TINA), and lays out a detailed, data-driven counterproposal that claims to reduce the pension bill from 7.8% to 5.4% of GDP without inflicting undue harm on vulnerable citizens. With a critical lens on past and present regimes, she explores the flaws of political convenience, the risks of policy capture, and the dangerous erosion of public trust. She also outlines a vision for structural reform — including the establishment of a Sovereign Wealth Fund and a break from Mauritius’ rent-seeking economic model.

* The figures speak for themselves: the share of the Basic Retirement Pension (BRP) in government recurrent expenditure, its proportion relative to recurrent revenue, and the steadily rising total pension bill year after year all point to one conclusion. As the Prime Minister stated last Tuesday, “The BRP has become fiscally unsustainable and financially unbearable.” There should be little room for disagreement on this point, shouldn’t there?

Nita Deerpalsing: First, let us wade through some misleading terminology: the BRP (basic retirement pension) is NOT a pension. It is a social benefit. A social allowance paid to all those who reach the age of 60. Just like widow’s benefits are social allowances. This social allowance is paid through the Consolidated Fund on a Pay As you Go (PAYG) mechanism. There is no such thing as a “contributory” widows benefit or a “contributory” orphan benefit. In the same way, the monetary benefit paid to those who reach age 60 would better be called an Old Age Benefit (OAB) instead of BRP. And because it is not a pension per se, it has nothing to do with the concept of “contributory” or “non-contributory”.

Now let us come to the international framework for the benefits that citizens receive after they leave an active professional occupation. It is deemed that any individual requires some 2/3 of their active occupation income after retirement in order to maintain more or less the same standard of living they had before retirement. This is borne out by the assumption that during the lifetime of an individual, a good part will be spent earning an income derived mainly from an occupation (as an employee or self-employed). Let’s denote that monthly income as “AAA” as illustrated in the infographic, which I urge you to publish for easier reader comprehension.

Out of the “AAA” amount which is the monthly salary the person earned during an active occupation, usually there are loans to be paid for housing, for raising and educating children. It is assumed that by the time the individual is no longer in a working environment, this person has paid off loans, the children have grown up and there are no longer any heavy expenses for them. Therefore, this person can now get by with 2/3 of AAA in order to more or less maintain the same standard of living in their retirement period.

But where is this 2/3 of AAA going to come from? This is where we have the 3-pillar concept whereby the person in their period of retirement has monthly income coming from three sources:

• Pillar 2: An employer provided pension which is derived from mandatory contributions that this person and their employer made over the working period. For us, this is the NPF for employees in the private sector, and for employees in the public sector there is also a defined contribution scheme which generates this amount. Normally this should be fully funded (FF) in order to ensure the payment due to the retired employee.

• Pillar 3: A payment from a private pension plan to which the employee has voluntarily subscribed and has made monthly payments from their disposable income over the time of his employment. This is a personal savings scheme if you like. This also operates on a fully funded (FF) basis.

• Pillar 1: a top-up from the State to ensure a social net below which no one falls. This solidarity of the State serves to ensure a certain level of well-being, particularly at the lower levels of the social ladder. It also contributes to the intangible asset of Nation Building. This is where our Old Age Benefit fits in.

It is worth noting that this is an overall framework and that there are several possible variations within each pillar from country to country. For example, for Pillar 1 there are countries which do not have a PAYG system but a FF (fully funded) one or a hybrid model.

* Beyond theoretical textbooks, what specific understandings would a contextual focus on Mauritius provide?

In our country we are confronted with the fact that we still have thousands of people who do not even have access to Pillar 2. This is the case for the thousands of women who have never had any formal employment to speak of.

Is it responsible today to say you are going to brutally remove all the access to Pillar 1 altogether for those aged 60-65?How is that inscribed in any notion of justice when the same people -when they were in their 30’s, 40’s, 50’s – have already contributed their own part in intangible terms but also via VAT to pay for those who were then turning 60 at that time? So, they contributed to paying for those turning sixty 30,20,10 years ago but now when they are turning 60, you tell them there is nothing for them?

In addition, thousands of people do not have Pillar 3 either! For many reasons – including having had very little disposable income to provide for any savings or that the savings culture in Mauritius has plummeted due to lack of robust policies encouraging same.

Now you have to look at this with the backdrop of the income curve in Mauritius which is extremely skewed. About 75% of the working population earns less than Rs36,000 a month in this country! Add to that, the fact that we are still very much under a rent-seeking economy whereby each citizen is forced to subsidize the too-big-to-fail cohort either through their monthly CEB bill or through eternal depreciation of our currency. And these lie squarely on the shoulders of the policy makers of all political hues who have been at the helm since say 1983. I am deliberately not counting the first 15 years or so after Independence because those were years committed to coming out of dire poverty under very difficult starting circumstances.

* But the PM has stated that as early as 2015, the IMF had projected BRP spending would reach an unsustainable 8% of GDP by 2050 — a threshold that has nearly been reached already, with current expenditure standing at 7. 8%, some 25 years ahead of schedule. The question now is: could the current government have continued sustaining the pension system in its existing form, or should it have explored alternative ways — if any were available — to finance it more effectively?

It is good that you have mentioned the annual outpay of OAB as a percentage of GDP. Because nobody worth their grey matter can talk about national expenditure items in absolute terms. So you can’t talk about Rs 55 bn in isolation. You have to say what percentage of GDP that represents. Similarly, you can’t be shouting about an 868% increase because that is totally intellectually dishonest. It is amazing to hear people repeating this nonsense in Parliament! It makes you wonder whether they are totally ignorant or whether they are being downright intellectually dishonest.

Yes, surely there is nothing to rejoice about with an OAB outpay which has reached 7.8 % of GDP. This is due to two important exacerbating factors:
1) the constant increase in the quantum since 1995 (which means all political colours are responsible) well over and above inflation — without any qualms about actuarial valuations, and the most reckless increase in quantum coming from the previous regime who unscrupulously and unashamedly weaponized the vulnerability of people at the lower end of the social ladder, and
2) the vertiginous decrease in our workforce due to lower fertility rates but also due to the fact that over the last 20 years or so thousands of citizens have decided that those running the country cannot offer them even the aspiration to a decent future.

Let us now delve into some numbers so that I can demonstrate how we can immediately be at 5.4% of GDP instead of 7.8% of GDP with a few tweaks and without imposing so much duress to those at the bottom of the ladder.

Let’s start with the given estimated 2025 GDP which stands at Rs 769.6 bn. I beg your readers’ indulgence to go step by step through the table below. Columns A to E are the figures given in the budget; and you will see that the total for column E is the famous Rs 55 bn payout for OAB. Let us highlight that this Rs 55bn is for 13 months of benefits.

Now from column F to H, I have just played around with the numbers to find some feasible alternatives.

In column F, let’s say that we remove the 13th month from the OAB. The outpay immediately goes from Rs 55. 7bn to Rs 51. 4 bn. And if from that Rs 51. 4 bn, you then remove completely those beneficiaries who are at the top 10% of the social ladder, you go down further to an annual outpay of approximately Rs 46. 29 bn. (For simplicity, I have used a proxy overall 10% rather than recalculating the number of beneficiaries). That amount of Rs 46.3 bn now represents 6.0% of GDP compared to the 7.8% we started with!

Now let us say we keep the payout for 12 months instead of 13 months; and we now envisage a revision downwards of the monthly payout just for the 1st two age bands. We do this as a correction to the previous reckless weaponizing increases of the previous regime.

So instead of Rs 15,000 for those aged 60 to 64, we revise it to say Rs 13,000 per month. Similarly for those aged 65-74, we revise the monthly payout to say Rs 14,000 instead of Rs 17,000. You would then end up with a total annual payout of Rs 46.5bn just with those downward revisions only for the 2 age bands.

Now if on top of that you use the same proxy claw back mechanism to shave off 10% from those at the top of the social ladder, you would now be looking at an approximate annual payout of Rs 41. 8 bn which is 5.4 % of the GDP instead of the 7. 8%!!!

This clearly demonstrates that those who parrot away the TINAwalla song are totally wrong and that there are alternatives. You just need to have the ability to do some scenario calculations on an excel spreadsheet. No rocket science involved.

Going forward, if we allow only inflation rate increases to OAB benefits, we would have tackled a good part of the problem. We should also find a way to legally ring-fence these increases so that vulture politicians like the MSM are not able to weaponize the poor. However, it is true that we will still be faced with the decrease in the number of workers for each OAB beneficiary.

* What about the alternatives?

This is where we should reasonably expect those at the helm — who are drawing salaries from the public purse — to develop innovative policies aimed at bringing back our sons and daughters who have fled the country in the tens of thousands. We also expect them to propose bold, forward-looking strategies to attract thousands of highly skilled workers and technicians on a rotating basis.

Such outcomes are possible if, for instance, the government were to secure deals with countries like India or China to relocate even a small share of their solar panel or semiconductor production or some other such product — destined for the African market — to Mauritius.

If we accept that we now have a super-duper dream team running the country, shouldn’t their remarkable vision and experience translate into real results: a stronger GDP and concrete solutions to expand the workforce? If the previous regime — with all its incompetence, corruption, wastage, and MIC handouts — could still deliver economic growth, wouldn’t a government genuinely committed to fighting corruption, reducing wastage, eliminating handouts would be able to yield a few percentage points of higher GDP growth?

* Speaking of the previous regime, it appears that Pravind Jugnauth, in his 2004 Budget speech, expressed his intention to “target those who truly deserve” old-age pensions and other forms of pension support. Former Finance Minister Renganaden Padayachy also allegedly argued in his 2018 thesis for raising pensions to or above the poverty line. However, he maintained that this would require better targeting of beneficiaries, criticising universal social policies for their “wastage,” as aid often reached both the poor and the wealthy. It seems both abandoned these positions as soon as they became politically inconvenient — didn’t they?

Let us examine the merits of targeted social assistance versus a clawback mechanism as alternative approaches to ensuring the fairness and sustainability of pension spending. Given our skewed income curve, only about 50,000 individuals out of the 260,500 OAB beneficiaries could be deemed to have no necessity for the Pillar 1 portion.

So instead of means-testing over 200,000 people, clearly it would be more administratively efficient to just claw back the Pillar 1 quantum from those at the top of the income curve. This can be easily done through MRA without the government incurring any additional administrative cost.

In the above scenarios, I have demonstrated how by using a clawback mechanism from the top 10% together with a corrective revision of the quantum we can get to a more breathable 5.4% of GDP instead of the current 7.8%.

I believe that if the current regime had applied leadership by example and said they were going to take a 10% cut of their own salaries, they were going to forego duty-free privileges, they were going to abolish the useless post of Vice President, they were going to shave off all those exceedingly numerous advisor posts as rewards paid by the public purse, they were putting in a convincing plan to practically eliminate all wastage of public funds, they were serious about curtailing corruption; and if they had held large pedagogical consultations, the proposals I have made above to go from 7.8% of GDP to 5.4% of GDP could have had a chance of being approved by all stakeholders.

I can only wonder whether those fatly paid advisors did present the PM with alternative scenarios. When you think that the mess caused has resulted in the resuscitation of the shameless MSM vampires who crushed the NPF, it is unbelievable that the PM would allow himself to be led in that space.

And now what? You are going to lament that the vultures are out? Vultures will be vultures. Throw them even an ounce of meat and they will pounce. It was your responsibility not to give them that piece of meat in the first place! The more so, when there were alternatives.

This is why I say we have just witnessed the biggest squandering of political capital ever. Courtesy of those TINAwallas who have succeeded in their brainwashing mission.

* Two inter-ministerial committees will be established: one to explore income support for individuals aged 60-65 (housewives, retirees, low-pension workers) who will lose BRP eligibility and rely on it as their main or sole income source; and a second to examine support for those unable to work due to health-related disabilities. Do you believe these measures will adequately address the reform’s impact?

As I’ve shown, there are alternatives to the TINAwalla-led narrative. It’s important not to uncritically accept the views promoted by the TINAwalla club.

Regrettably, what we have seen, especially from a Parti Travailliste-led government, is hard to accept , particularly for those who still subscribe to the founding ideals of the PTr.

* Considering the model adopted by several developed countries, what are your thoughts on implementing a pension system that includes a contributory element (with exemptions for low-income earners) and incorporates means-testing for old-age pensions, thereby allowing for more efficient and equitable allocation of public resources and targeted support to those most in need?

There is ample research and analysis about pension models adopted by various countries. Many countries have experimented with various designs with limited actual results compared to what was expected. For example, in Chile which decided to convert its Pillar 1 from strictly PAYG to FF (fully funded), the results were found to be inconclusive. They had expected to capture the whole informal sector of the economy but that was not the case. There were many other myths broken with that experiment.

A good short piece to educate oneself on this debate between PAYG vs FF models, is a short paper published by none other than the IMF, entitled: “The Truth about Pension Reform”. This short brief draws from a previous IMF working paper: “Reforming Pensions: Myths, Truths and Policy Choices” which itself draws heavily from LSE Prof Nicholas Barr’s book ‘The Welfare Stat as a Piggy Bank: Information, Risk Uncertainty and the Role of the State’.

Furthermore, let us move away from the TINAwalla scaremongering narrative. At the link (https://ourworldindata. org/government-spending)you will see that the average OECD expenditure on “Social Protection” is around 25-30% of GDP. This includes Health but not Education. In Mauritius, we are at about 6% of GDP for Health and 5% of GDP for Education. If we add even the 7.8% figure for OAP, we are still far from the 25-30% share of GDP of countries in which citizens enjoy a high level of well-being.

The question is what policy choices you make to bring about incremental sustainable gains that will contribute to lift the masses out of vulnerability so that they cannot be used as weapons by vulture politicians such as the MSM breed.

On that score, by pushing people at the bottom of the ladder into further duress, this regime is arguably facilitating the political weaponizing of poverty and vulnerability of those at the lower and lower-middle part of the income curve.

* It has been suggested in some quarters that the current PM-Finance minister should give more weight to the voices of the most vulnerable than to the opinions and prescriptions of economists or Moody’s ratings. However, do you think that prioritizing short-term political gain over sound economic principles would truly help the country in the medium and long term?

Let me tell you what I believe is reasonable to expect. But what will probably not happen.

It is urgent to prioritize a real “rupture” with the rent-seeking model we have. Let me give you a sense of the magnitude of the burden of this rent-seeking model on each citizen. And this is only a partial view, I will not even go into the historical depreciation of the rupee, the systemic tools to favour cartel-like behaviour instead of free-market competition etc.

So, let’s say each household has a Rs 1,000 CEB to pay every month. Out of this bill, because of the price structure of the IPPs, each household is paying an estimated excess of Rs 600 over and above any notion of fair and reasonable profit that the IPPs deserve. Now there are some 370,000 households in Mauritius. When you do the maths, you will find that there is a staggering Rs 2. 7 billion annually that Mauritian households are forking out to feed greedy and abusive private profits. Over a 30-year ‘contrat en béton’ this gives you a rough estimate of some Rs 80 billion rupees siphoned off of the pockets of each household to feed some greedy fat cats.

You will note that I haven’t even accounted for all the CEB bills outside of households. If we were to do that, we would probably be looking at a whopping figure exceeding Rs 100 billion rupees that the Mauritian population has been forced to fork out over the last 30 years, to cater for the generous “welfare state for the well-connected”. I can only shake my head when people ask me why I talk about this all the time or when people label this call for justice as “extremist”!!

Now any reasonable person could ask: why is there no stop to this blatant economic injustice from policy makers of all political colours? Well, the answer is clear: this generosity, which perpetuates with the complicity of policy makers, has a link with political party financing. To put it bluntly, today most of our politicians are merely bought actors whose “marge de manoeuvre” is sadly limited to making theatrical speeches about convictions, about “justice” during campaigns and inside parliament. I wonder if we have politicians who believe in a noble purpose.

Unfortunately, convictions cannot breathe under the weight of the envelopes of political contributions from the IPPs. Hence the extent of policy captures in this country. Hotel industry, IRS/Smart city schemes, Currency depreciation, Banks, Insurances, Food distribution… you name it, everything has a good dose of policy capture embedded into it.

Personally, I did not have a lot of hope with the MMM onboard, but I honestly do not expect the Prime Minister to embrace the views promoted by the TINAwalla club.

* What else do you expect the Ramgoolam-Bérenger team to reform to remain true to their “rupture agenda,” which aims to undertake reforms not as isolated measures, but as part of a coherent, long-term vision for Mauritius?

There are several things to do including a genuine “rupture” with the rent-seeking model. But let me mention one critically urgent thing to do in order to protect our finances for the future.

It is time to set up a Sovereign Wealth Fund inspired by Singapore’s Temasek Holdings. We could put Rs 170 billion of NSF there. To that we could add some annual Rs 5 billion from the abusive IPP price structure there – provided there is the political courage to dismantle the injustice embedded in each household’s CEB bill. Perhaps also consider part of the Rs 10bn Chagos rent.

But it will be critically important to robustly ring-fence that Sovereign Wealth Fund so that no politician can ever come close to it. That can be done by bringing a bill to parliament to make it impossible to play with those funds. The point is to prevent any future instances where NPF billions are “invested” in business ventures — such as those recently linked to cronies of the previous regime who are alleged to have profited excessively from MIC funding.

What I truly hope for, particularly from Dr Ramgoolam — less so from Mr Bérenger — is that he will consider alternative perspectives beyond those championed by the TINAwallas. Who are simply incapable of thinking out of their TINA box. And anyone who doesn’t fall at their feet and garland them for their supposed brilliance is a demagogue who doesn’t even begin to understand their complex technicity. That’s how they try to manufacture consent.

And what I expect from any 2025-era Member of Parliament is that they can open an Excel spreadsheet and discover the world of alternatives that ARE available instead of constantly parroting a boring TINAwalla ‘lugaru’ song.

Mauritius Times ePaper Friday 27 June 2025