Maldives Retirement Pension Scheme
Maldives Retirement Pension Scheme (MRPS) is a contributory Pension Scheme introduced under the Pension Act of Maldives. The primary objective of this scheme is to ensure that individuals save during employment to cater for their livelihood in retirement.
Presently, the Pension Act mandates a monthly contribution of 14% of the pensionable wage of the employee and allows voluntary contributions. Contributions collected is invested to increase its value and maximize savings for retirement.
Contributions to the scheme stops at the age of 65 years and members may start to drawdown on the pension plan at this age.
As per the Pension Act, employees between 16 to 65 years of age and their employers are required to participate and pay contributions to MRPS. All administrative arrangements regarding employee enrolment, submitting pension statements and paying contributions to the scheme are handled by the employer.
Mandatory monthly contributions to the scheme is 14% of the Pensionable wage of the employee. A minimum of 7% of the total 14% must be paid by the employer while the remaining 7% is paid by the employee. The Act does not bar an employer from paying the total 14% of the pensionable wage without obtaining contributions from the employee.
Foreign nationals and self-employed individuals working in the Maldives can participate in MRPS voluntarily. Unlike the mandatory monthly contributions of employees there is no fixed contribution requirement for the self-employed, members are free to decide the amount and frequency of payments. However, annual contributions amount should not exceed the annual mandatory contribution amount of the highest paid state employee.
Retirement Savings Account
Under MRPS a Retirement Savings Account (RSA) is created for each member of the scheme. Pension Contributions and returns from its investments are credited to this account.
Members can check the balance of their RSA online through the Pension Office website or using Pension mobile application. Printed statements are also provided to members upon request.
MRPS members can start to drawdown from their RSA upon reaching the pensionable age (65 years) or at the age of 55 years, provided that they qualify for early retirement.
When and how to apply
MRPS members who wish to apply for pension are required fill and submit 'Pension applicant’s information form' to Pension Office. This form can be submitted 6 months prior to reaching 65 years or any time after that. If the member qualifies for early retirement he/she can submit the application upon reaching 55 years or anytime after that.
Before starting to fill the application form please ensure that:
- The applicant is eligible to receive pension from MRPS
- The applicant has a valid National ID card
- The applicant has an active bank account opened in the applicants name in a bank operated in the Maldives
If the applicant is unable to apply for MRPS or unable to open a bank account due to ill-health, his/her legal guardian may initiate the application process by requesting Pension Office to allow the legal beneficiary or guardian to apply and withdraw pension benefits of the person whose health condition does not permit him/her to fulfil the formalities required to apply for pension or withdraw pension benefits.
‘Pension applicant’s information form’ can be downloaded from Pension Office website www.pension.gov.mv and is available from Pension Office reception and island/atoll council offices. Forms can be submitted:
- Directly to Pension Office reception
- By post
- Through island/atoll council offices
- By email (only for single account holders)
No supporting documents are required to be submitted with the application form.
The receiver (Pension Office/Council office) of the application provides an acknowledgement (the slip provided in the application form) of receipt to the applicant. The applicant must keep this acknowledgement slip until the first pension payment is received.
Pensioners receiving pension upon reaching 65 years
Balance in Retirement Savings Account / 14 years (168 months)
Example 1: 1,000,000/168 = 5952 (will receive MVR 5952.38 monthly, until RSA balance is exhausted)
Example 2: 500,000/168 = 2976.19 (will receive minimum amount MVR 5000 monthly, until RSA balance is exhausted)
Pensioners eligible for early retirement upon reaching 55 years
Balance in Retirement Savings Account / 22 years (264 months)
Example 1: 300,000/264 = 11,364 (will receive MVR 11,364 monthly until RSA balance is exhausted)
Applications submitted with correct and complete information are entered into the Pension Management System within 3 days of receiving the application.
If there are any inconsistencies in the information provided in the application form the applicant will be notified. If any critical information such as bank account number is missing or incorrect the application is rejected and the applicant is notified.
Bank Account verification
Step 1: Bank account information provided in the application form is verified against information available with the respective banks.
Step 2: Forms received up to the last day of the previous month are sent for verification during the first week of the following month.
Step 3: Applicant is informed about inconsistencies in the bank account information identified during the verification process and request for corrective action.
Deposits to Accounts
Pension Office instructs banks to deposit monthly pension amounts to individual pensioner’s bank accounts during the last week of every month.
Contributions to MRPS are invested to maximize its value and increase Pension Savings of members. Investment decisions are made as provided in the Pension Act and statement of investment principles.
The current MRPS investment strategy is to generally preserve the capital value of member contributions and grow in line with the Maldivian economy at a rate higher than domestic inflation by investing in assets allowed in the Pension Act.
Asset classes stated below are allowed for MRPS Investments:
- Bank accounts and monetary funds such as bank deposits, held in banks licensed by the Maldives Monetary Authority classes of assets
- Securities issued by a relevant body of the Government of Maldives and to the extent guaranteed by such a body
- Securities issued by business entities listed on a licensed stock exchange in the Maldives
- Mutual and investment funds duly approved in the Maldives
Investments outside the Maldives, in the classes stated above, are also allowed under the Pension Act, provided they are licensed by the relevant regulatory authority in that country.
MPAO's investment horizon is long term. The investment strategy is to grow the pension savings of individual members and provide protection against sudden fall of pension savings close to retirement. It is estimated that the pension fund will have a maturity of 40 years where the inflows would level against the outflows of the fund. MPAO invests in both conventional and Sharia Compliant assets.
Members contributing to MRPS have two funds to deposit their pension contributions for investments.
MRPS Investment Fund
The Investment Fund is the default fund of MRPS and focuses on diversifying investments in assets allowed under the Pension Act and available locally to achieve a return above the local inflation rate. Fund investments are diversified across a range of multi-asset classes which are currently Treasury Bills, Treasury Bonds, Corporate Bonds, Equities and Bank Deposits.
Current Investment Policy
To invest in:
Cash and Cash Equivalents (CCE)
1. Interest bearing and non-interest bearing deposits in Maldives currency with banks in the Maldives licensed by the Maldives Monetary Authority.
2. Treasury Bills issued by Maldives Monetary Authority
Growth Assets (GA)
1. Equities listed on the Maldives Stock Exchange,
2. Bonds listed on the Maldives Stock Exchange
3. Bonds and other evidence of debt in Maldives currency issued or guaranteed by the Government of Maldives
MRPS Sharia Fund
The Sharia Fund can be chosen by members wishing to invest pension contributions in Sharia compliant assets. MPAO regards assets as sharia compliant if those assets are considered as sharia compliant by competent sharia authority approved in Maldives. This fund also targets to beat the local inflation rate and perverse capital value by investing in sharia compliant assets allowed under the pension act and available for investments in the Maldives. Investments are currently made in GIAs (Fixed Deposit) and Corporate Sukuk (Sharia Bonds).
Post Retirement Funds
Funds of members who have retired are moved into separate two Funds during the payout phase which invests in short-term investments to maintain liquidity.
Funds of retiring Investment Fund members are moved to the Conservative fund which typically keeps a set portion as cash and typically invests in Treasury bills and Fixed Deposits. Funds of members retiring from the Sharia fund are moved to the Sharia Retirees Fund which also keeps a set portion as cash and invest typically invests in GIA.
Performance of Funds
All MRPS funds are unitized funds. Member interest in the fund is represented by units and members are allocated additional units when contributions are made and units are redeemed on transfer of funds and on exit. Individual member balances are valued based on fund price.
Demise of a member
Any funds left in the retirement saving account of the deceased member belongs to the legal heirs of the MRPS member. The legal beneficiaries are required to submit their claims through a legal court. Pension Office releases the funds to the respective court upon receipt of instructions from the court.