Socioeconomic Development Chapter 6 Welfare state 891. Noncontributory social benefits. The state grants benefits to all. They include free public transport for all students and senior citizens as well as subsidies on basic food products. 892. Contributory social benefits. The state provides special protection. It covered the main risks by introducing the unemployment benefit in February 2009. 893. Retirement benefits. The current retirement scheme enables those who contributed 9 per cent of their incomes for 40 full years to receive a retirement benefit equal to one-third of their updated average monthly incomes after the age of 60 years. Those who contributed 13.5 per cent receive 50 per cent of their updated average monthly incomes. 894. The APR Panel questions the adequacy of the current retirement plan. Even though the real retirement benefit includes basic noncontributory and contributory pensions, the change in income is considerable for a large portion of people who change from the status of employed workers to that of retirees. This is why, in accordance with Section 38 A of the National Pensions Act, the next actuarial review (which is due in June 2010) should examine different assumptions, including various retirement schemes enabling employees who have contributed for 40 full years to receive a retirement benefit equal to 70 per cent to 75 per cent of their updated average monthly income from the age of 60 years and from the age of 65 years. 895. The Government Actuary’s Department has just published a report on the Mauritian pension fund. It shows that the current pension scheme will continue to generate surpluses until 2045. The fairness of these surpluses must be questioned if retirees receive such modest benefits. Chapter 6 Box 6.3: Socioeconomic Development The financial situation of the Mauritian Pension Fund: Projections of expenditure and revenue until 2040 Current expenditure on contributory pensions is still relatively modest. The projected increase in contributory pension expenditure, in constant price terms, reflects the increasing number of people over pensionable age and the increasing maturity of the scheme. This second factor is partly caused by the increase in the projected number of pensioners relative to the population and partly to the increase in the average number of pension points accrued at retirement. Pensions at retirement, expressed in constant price terms, also increase because of the effect of growth in real earnings. The income from contributions is currently much greater than the combined expenditure on contributory pensions, industrial injury pensions and administration costs. Estimates for the next 10 years show that substantial amounts of excess income will be available for investment, although the amounts will gradually decline. Estimates also show that, by 2020, the expenditure on benefits and administration costs will exceed the income from contributions. Thereafter, as the expenditure on pensions continues to increase at a faster rate than the income from contributions, the expenditure on pensions and administration costs will exceed the income from contributions by an increasing margin. Investment income and/or the proceeds from the sale of assets must meet this shortfall. The fund amounted to about Rs38 billion in June 2005. This is more than 60 times the annual level of expenditure on contributory and industrial injury pensions. Projections show that the fund balance will have increased to over Rs88 billion in constant 2004/2005 price terms by 2025 and to more than Rs150 billion by 2045. This is about 29 times more than the annual expenditure on contributory and industrial injury pensions. This projected increase in the fund’s assets for the next 40 years is because the combined income from contributions and investments will exceed the expenditure on benefits and administration costs for each year in the projection period. 896. These huge surpluses are based on retirement at age 60. The surpluses will increase considerably if this age is increased to 65. Unemployment benefits 897. The unemployment benefit was introduced in 2009. The state pays benefits for a maximum of one year. The amount of the benefit is 90 per cent of the salary of the first quarter, 60 per cent of the second quarter and 30 per cent of the last two quarters. Policy on distribution and industrial relations 308 898. The key element of the distribution policy is the wage policy, because salaries and wages are the main source of revenue. They amount to nearly 70 per cent of national revenue. 899. Mauritius has made great progress in social protection and promoting welfare, as well as in social dialogue. However, the trade unions 309