Allowing withdrawal of funds from the pension scheme will cause to lose investment possibilities: CMDA

Capital Market Development Authority (CMDA) has said that allowing members to withdraw money from their pension funds will cause to lose the possibility of the government to make further investments, and possibly cause difficulties for the government to provide retirement funds in the future.

Amendments proposed by Guraidhoo MP Ibrahim Riza to the Pension Act, currently being debated in the Parliament include clauses along lines that all employees must be able to withdraw their pension savings for certain purposes including; for a person to make the Hajj pilgrimage, to seek medical treatment from a foreign country, to undertake higher education, to build property, and to start a personal business.

In answer to these amendments, the chief market promotion and regulation authority CMDA has said that granting the withdrawal of pension funds will cause to increase the number of people who get a smaller amount for the pension scheme than that for the basic pension, which will in turn increase the amount the government will have to spend on basic pension.

“If the amendments currently proposed to the pension act are incorporated, the effectiveness of the pension scheme will be reduced to cause the pension scheme to return to its former state. Allowing its members to withdraw money from the scheme for different purposes will cause the system to go back to a state where the State spends money from its budget for welfare purposes without a proper process. The relevant authorities are working establish adequate legal and administrative system to facilitate and provide housing, education and other such services,” CMDA stated.

The authority also stated that instead of allowing the members of the pension scheme to withdraw funds, the proper action at this moment in time would be think about the developmental investments that can be made by utilizing the pension funds and for the government to initiate projects for the development of the private sector. They said that these steps need to be taken for the country to climb out of the its current economic ditch.

“The 2009 pension act introduced a very new pension system. At a time when efforts are being made to improve the current system, proposing amendments such that the existing legislation may change will cause the members to lose faith in the system and diminish their certainty of the of the pension they are to receive in the future,” CMDA stated.