A few years ago, the Pension Fund and the General Organization for Social Insurance (GOSI) were not talking about the need to raise the retirement age. Now they call for its extension, citing various reasons. What prompted the two to change their stand on the issue?
Rapid global changes, especially falling oil prices, the negative impact of the Arab spring, the expensive war on terror and the Yemen conflict have all put extra pressure on the coffers of the Gulf nations.
The continuing war in Syria has had a negative effect on the Saudi economy since 2011. This has forced some organizations like the Pension Fund to change their position. The Pension Fund has even stated that after five years it will face real financial problems in supporting government employees. Why after five years? This is an important question.
About 10,000 government employees will retire this year alone. Some of them will either leave their jobs, or opt for early voluntary retirement. These employees, according to the Pension Fund’s estimates, were born before 1957, but the real problem begins with civil and military servants who were born in 1960 or later.
In this period, Saudi Arabia witnessed unprecedented development under the rule of King Saud, with the reorganization of ministries, increase in population and the establishment of colleges and universities. It was the beginning of the Kingdom’s transformation into a modern state.
During the reigns of King Saud and King Faisal, Saudi Arabia launched its modernization program, which was followed by a substantial improvement in education standards, paving the way for the birth of a large number of new graduates and military officers who were employed during the first economic boom (1975-1985). This period is distinguished for its abundance with an unprecedented growth in state revenues, which in turn created large scale employment opportunities in both military and civil services.
On the other hand, the positive impact of the economic boom on the private sector led to the emergence of small and big enterprises across the Kingdom. The increase in the birth rate in the 1960s and the subsequent employment of large numbers of people in government services in the 1980s will result in a mass retirement of public servants drawing huge salaries by 2020 and it coincides with a global economic recession and political change.
This will certainly put strains on the budgets of the Pension Fund and GOSI if the authorities fail to find a quick and effective solution to ensure their sound financial management.
