{"id":46318,"date":"2026-07-06T21:30:39","date_gmt":"2026-07-06T17:30:39","guid":{"rendered":"https:\/\/www.mauritiustimes.com\/mt\/?p=46318"},"modified":"2026-07-06T21:30:39","modified_gmt":"2026-07-06T17:30:39","slug":"the-pension-experiment-mauritian-style","status":"publish","type":"post","link":"https:\/\/www.mauritiustimes.com\/mt\/the-pension-experiment-mauritian-style\/","title":{"rendered":"The Pension Experiment — Mauritian Style"},"content":{"rendered":"

Analysis<\/u><\/span><\/p>\n

Many younger people have resigned themselves to never receiving a pension. That resignation may be the most worrying sign of all<\/em><\/span><\/h3>\n

By Manisha Dookhony<\/strong><\/span><\/p>\n

Over the past fortnight, the budget discussion has morphed into more of a pension debate. I have had the privilege of participating in numerous discussions across the country about the budget, but pension reforms dominated the engagements. From boardrooms to meeting halls, lunchrooms to coffee table conversations, the same questions keep surfacing with remarkable consistency: What happens to my contributions? Will I be better or worse off? Who will safeguard my retirement savings? As these conversations unfolded, I found myself increasingly drawn to a broader question: how do other countries navigate these challenges? What I discovered is both illuminating and, frankly, sobering.<\/span><\/p>\n

\"\"<\/span><\/p>\n

Let me begin with our own more recent story. In August 2020, the National Pensions Fund was abolished and replaced by the Contribution Sociale G\u00e9n\u00e9ralis\u00e9e (CSG). The key change was that CSG contributions were funnelled directly into the government’s Consolidated Fund rather than a dedicated pension pool. Essentially, what was being collected in one hand was being distributed out with the other, and sometimes more was being distributed, and for more than just pensions. This fundamentally altered the nature of our retirement system.<\/span><\/p>\n

Fast forward to today, and the CSG is already being scrapped. Why? Because it has become financially unsustainable. Since the 2023\/24 financial year, benefit payments have exceeded contributions, with the gap widening to approximately Rs 9 billion in 2024\/25. Ironically, while the CSG was initially designed to replace the retirement pension, the funds collected were ultimately redirected to a broad array of social benefits: income allowances for workers earning under Rs 50,000, child allowances for parents of young children, school allowances for children aged 3 to 10, maternity allowances, pregnancy care support, and housing loan relief for borrowers with mortgages, amongst others.<\/span><\/p>\n

The system was plainly in trouble. Money collected through CSG was not invested in a dedicated fund; it was spent on current expenses, meaning no specific assets were set aside for future retirees. The National Pensions Policy Framework reform appears to be an attempt to fix these problems by creating individual accounts based on a capitalisation model, but yet again, we need to see how it gets implemented.<\/span><\/p>\n

But here is the uncomfortable truth that underpins all of this. Mauritius faces a genuine demographic crisis. The decision last year to gradually raise the BRP eligibility age from 60 to 65 is a direct response to this reality. Yet equally concerning is our shrinking population. Fewer babies are being born, making it exceedingly difficult to reverse this trend. It is a demographic trap from which few countries have successfully escaped. Will the dependency ratio reduce? It does not seem to be anytime soon.<\/span><\/p>\n

So how do other countries handle these same pressures? I have spent some time exploring global pension models, and the variety is striking. I found essentially three main financing models dominate internationally. <\/span>
\nThe capitalisation system, the one the NPPF is seeming to be adopting, invests contributions in financial markets, with pensions depending on accumulated amounts and market returns. This model prevails in the United States, Canada, Australia, the Netherlands, Switzerland, and Nordic countries. In some cases pension assets exceed GDP, reaching over 200 percent in Denmark’s case. At the opposite end, the Pay As You Go system used in France and Germany uses current workers’ contributions to directly pay today’s retirees, without building large financial assets. Between these extremes, public reserve funds, established in more than two thirds of OECD countries, serve as buffers against demographic or economic shocks, as seen in Japan and South Korea.<\/span><\/p>\n

Governance structures vary enormously. Some funds manage their own assets internally. Others increasingly delegate to external managers, especially in the United States, requiring strict oversight controls to ensure that funds are managed professionally and in a modern way. Still others adopt tripartite governance involving employers, employees and the state, precisely the model Mauritius has historically used for the NPF.<\/span><\/p>\n

Investment strategies are equally diverse. Mature funds diversify internationally. Norway’s sovereign fund invests its assets abroad, and the Dutch ABP places most of its equities outside national borders, to reduce risk. The balance between stocks and bonds is a strategic choice. Buffer funds typically allocate more to equities for better long-term returns but with greater volatility. Meanwhile, Asian funds are increasingly exploring illiquid assets like private equity. Performance varies dramatically from one fund to another and year to year.<\/span><\/p>\n

An emerging trend is artificial intelligence. Some pension funds are cautiously exploring AI applications. The argument is compelling. AI driven portfolio construction can reduce human bias and improve efficiency, potentially delivering better returns without increasing risk. Machine learning models are being used to forecast stock returns, generate buy and sell signals, and optimise trade execution. Researchers have found that certain models show promise in forecasting pension fund performance. Technology is still emerging and widespread adoption remains limited currently, but this could expand.<\/span><\/p>\n

The fundamental question is this: what happens if NPPF investments underperform? In a capitalisation-based system, this risk is inherent. Success depends entirely on investment performance. Lower than expected returns will inevitably mean lower pensions. Who bears this risk? How will it be managed?<\/span><\/p>\n

The CSG system created no individual rights or assets. The new NPPF appears to address this by establishing individual retirement accounts, but the devil is in the details and we are still waiting for those. As for existing contributions, the situation is concerning. All CSG contributions paid since September 2020 have been spent, with no remaining balance. The fate of older NPF and NSF contributions remains uncertain.<\/span><\/p>\n

As we navigate this transition, I find that many countries have successfully managed the shift to capitalisation systems, but they did so with robust governance frameworks, clear rules about contribution protection, and transparent investment strategies. Others have stumbled badly, leaving retirees vulnerable to market volatility or poor management.<\/span><\/p>\n

The NPPF is more than a technical reform. It is a fundamental reshaping of the social contract between the state, employers, and workers for decades to come. As we move forward, I hope our policymakers are looking beyond our borders, studying both the successes and failures of others. The questions I have been asked in town halls across Mauritius are legitimate and urgent. The answers we provide, and the systems we build, will determine whether our parents, us, our children and grandchildren can retire with dignity or face an uncertain future.<\/span><\/p>\n

In my discussions, many younger people have sort of resigned themselves. Many are saying that they should not count at all on getting any funds from the pension system anymore. That resignation, perhaps, is the most worrying sign of all.<\/span><\/p>\n

\n

Mauritius Times ePaper Friday 3 July 2026<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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