Assessing the financial sustainability of parametric pension system reforms: The case of Morocco

EL-HOUJJAJI, Hind and ECHAOUI, Abdellah (2020): Assessing the financial sustainability of parametric pension system reforms: The case of Morocco.

Abstract

In 2015, the government adopted a parametric reform intended to deal with the critical financial situation of the CMR civilian pension regime. In this paper, we examine the robustness of this parametric reform by using the Cohort-Component population projection model to the fund’s population during the period 2014-2064. First, we divide the population of the baseline year into cohorts classified by age and sex and then we project the year-on-year demographic transition of each cohort. Second, we lead a projection of the financial situation related to the 2015 parametric reform. Moreover, we project the status quo situation and an alternative scenario where we propose to increase solely the retirement age, and then compare the results with those of the 2015 parametric reform. Our results show that, for the three scenarios, a parametric reform will have a limited effect on the financial situation, in both the long and the short-terms. Under a status quo situation, the reserves are expected to run out in 2023, while under the current parametric reform and our proposed reform, they are expected to expire in 2033. Furthermore, our alternative scenario seems to have some more advantages so that it doesn’t reduce the rights of beneficiaries.

• Item Type: MPRA Paper
• Language: English
• Keywords: PAYG pension scheme; parametric reform; CMR pension scheme;social policy; retirement; Morocco
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J1 - Demographic Economics > J11 - Demographic Trends, Macroeconomic Effects, and Forecasts; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies

References

Abdessalem, T. and Chekki Cherni H. (2016), Tunisian pension system sustainability: towards a multidimensional reform, Région et Développement n° 44, pp 165-182.

Abío G., Mahieu G. and Patxot C. (2004), On the optimality of PAYG pension systems in an endogenous fertility setting, Journal of Pension Economics and Finance, 3, pp 35-62.

Agudo L.F. and García M.A. (2011) Pension reform in Italy: Description and evaluation, Pensions: An International Journal, Vol. 16, issue 2, pp 96-106.

Alho J.M., 1990, Stochastic methods in population forecasting, International Journal of Forecasting 6 (1990) 521-530

Altiok H.U. and Jenkins G.P. (2013), Social security generosity, budgetary deficits and reforms in North Cyprus, Journal of Economic Policy Reform, Vol. 16, N° 2, pp 218-235.

Ayed Zamba A. and Ben Hassan L., (2013), The pension reform proposal for Tunisia, the case of the general NPSIF scheme, Journal of Economics and Business Research, year 19, n° 2, pp154-166.

Ben Braham M. (2009), pension system and reform in Algeria, Morocco and Tunisia. International social security review, vol 62, N° 2, pp 101-120.

Ben Braham M., Dkhissi I., Pétron A., Eddine H. N., El Moudden C. and Dupuis J., (2011), L’impact des systèmes de retraite sur le niveau de vie des personnes âgées au Maghreb. Economie et statistique, n°441-442, pp. 205-224.

Boudahrain A. (2003), Social security pensions in the Maghreb: A study of Morocco and Tunisia, International Social Security Re view, Vol. 56, 3-4, pp 121-138.

Brugiavini A., and Galasso V., (2004), The social security reform process in Italy: Where do we stand?, Journal of Pension Economics and Finance, 3(2), pp 165-195.

Burch T.K., (2018), Model-Based Demography, Demographic Research Monographs, XVIII, Cham, Springer International Publishing, 200 pages.

Cabinet Actuariat (2010), commission technique sur la réforme des retraites, rapport final de l’étude : Synthèse des travaux.

CMR (2015), the 2015 activity report.

COR (2001), premières réflexions sur une politique et des mesures de rééquilibrage du système de retraite.

COR (2019), Evolutions et perspectives des retraites en France, Synthèse du rapport annuel du COR.

Cour des Comptes (2013), Rapport sur le système de retraite au Maroc, diagnostic et propositions de réformes.

Cremer H. and Pestieau P., (2000), Reforming our pension system: Is it a demographic, financial or political problem?, European Economic Review 44 (2000) 974-983.

Dahir n° 1-16-109 du 16 kaada 1437 (20 aout 2016) portant promulgation de la loi n° 71-14 modifiant et complétant la loi n° 011-71 du 12 kaada 1391 (30 décembre 1971) instituant un régime de pensions civiles, Bulletin Officiel N° 6496 du 1/09/2016, pp1380-1381.

Dahir n° 1-16-110 du 16 kaada 1437 (20 aout 2016) portant promulgation de la loi n° 72-14 fixant la limite d’âge des fonctionnaires et personnels affiliés au régime de pensions civiles, Bulletin Officiel N° 6496 du 1/09/2016, pp1382-1383.

D'Amato, M., and Galasso, V. (2002), Assessing the political sustainability of parametric social security reforms: the case of italy. Giornale degli economisti e annali di economia, 61 (anno 115)(2), nuova serie, pp 171-213.

De Bustillo R. M., De Pedraza P., Anton J. I. and Rivas L. A. (2011), Working life and retirement pensions in Spain: The simulated impact of a parametric reform, International Social Security Review, vol. 64, 1, pp 73-93.

Disney R. (2003), Public pension reform in Europe: Policies, Prospects and evaluation, The World Economy, Vol. 26, Issue 10, pp 1425-1445.

Dupuis J., El Mouden C., Petron A. (2010), Les systèmes de retraite du Maghreb face au vieillissement démographique, Revue française d’économie, vol.15 (1).

Fanti, L. and Gori, L. (2012), Fertility and PAYG pensions in the overlapping generations model, Journal of Population Economics, Volume 25, Issue 3, pp 955–961.

Cipriani G.P., (2014), Population aging and PAYG pensions in the OLG model, Journal of Population Economics, Volume 27, Issue 1, pp 251–256.

Gonzalez C.I., Conde-Ruiz J.I. and Boldrin M. (2009), Immigration and Social Security in Spain, Documento de Trabajo 2009-26, Inmigración FEDEA - Banco Popular.

Hachon C. (2008), Redistribution, pension systems and capital accumulation, Financial Theory and Practice, Institute of Public Finance, vol 32 N° 3, pp 339-368.

Hagemann R. P. and Nicoletti G. (1990), Le financement des retraites publiques face à la transition démographique dans quatre pays de l'OCDE, Economie et statistique, n°233. Dossier : L'avenir des retraites / La baisse de la lecture. pp. 39-51.

HCP (2012), Vieillissement de la population marocaine : effets sur la situation financière du système de retraite et sur l’évolution macroéconomique.

Houssi C. (2003), Pensions in North Africa: The need for reform, The Geneva Papers on Risk and Insurance, Vol 28 N° 4, pp 712-726.

Houssi C. (2005), Reality and challenges of pension Schemes in Tunisia, International Social Security Review, Vol. 58, 1/2005, pp99-120.

Kings, J., Turkisch E. and Manning N. (2007), Les régimes de retraite du secteur public et le défi du vieillissement de la fonction publique, Documents de travail sur la gouvernance publique, 2007/2, Éditions OCDE.

Kuitto K. (2018), Measuring Welfare Entitlement Generosity in Transitional Welfare States: The Case of Postcommunist Countries in Central and Eastern Europe, Social Indicators Research, Vol 136, Issue 1, pp 23-224.

Natali D. (2004), Europeanization, policy arenas, and creative opportunism: the politics of welfare state reforms in Italy, Journal of European Public Policy, 11:6, pp 1077-1095.

Peinado P. and Serrano F. (2012), A dynamic analysis of the effects on pensioners’ welfare of social security reforms. Journal of Pension Economics and Finance, 11, pp 71-87.

Romaniuc A. (1990), Population projection as prediction, simulation and prospective analysis. Population bulletin of the United Nations, (29) pp 16-31.

Sayan S. and Kiraci A. (2001), parametric pension reform with higher retirement ages: A computational investigation of alternatives for a pay-as-you-go-based pension system. Journal of Economic Dynamics and Control, Vol.25, Issue 6-7, pp 951-966.

Scruggs L. (2006), The generosity of social insurance, 1971-2002, Oxford Review of Economic Policy, Vol. 22 N° 3, pp 349-364.

Towerbridge C. (1952), Fundamentals of pension funding, Transactions of Society of Actuaries 4, pp 17-43.

Vidal-Meliá C. (2014), An assessment of the 2011 Spanish pension reform using the Swedish system as a benchmark, Journal of Pension Economics and Finance, 13, pp 297-333.

Volkov Ia. (2010), Modeling Pension Reforms and Estimating Implicit Pension Debt, Problems of Economic Transition, vol. 52, no. 11, pp. 4–23.

World Bank (1994), Averting the old age crisis: Policies to protect the old and promote growth: Summary. Washington, DC: World Bank.

Whelpton P.K. (1936), An Empirical Method of Calculating Future Population, Journal of the American Statistical Association, Vol. 31, N° 195, pp 457-473.

Zaidi A., Grech A. and Fuchs M. (2006), Pension Policy in EU25 and its possible impact on elderly poverty, centre for analysis of social exclusion, working paper, N° 116, December.

Zeng Y., (2011), Effects of Demographic and Retirement-Age Policies on Future Pension Deficits, with an Application to China, Population and Development Review 37(3), pp 553–569.