Keeping EOBI afloat

Listen to article

The decision to increase pensions for beneficiaries of the Employees Old-Age Benefits Institution (EOBI) is a welcome move to ease life for private sector retirees who have been struggling due to the immense loss of value of their pensions since record inflation began a few years back.

However, while this positive development deserves commendation, it is essential that the EOBI addresses the issue of fake claims that has compromised the integrity of the system and drained the underfunded pension programme of valuable capital. Most of the fraud detected was in cases of 'underage' pensioners, with people having used forged documents to present themselves as being eligible to tap into their pensions.

A critical reform — making only CNICs acceptable for proof of age - should help marginalise, if not eliminate, such fraud. While 5,000 middle-aged pensioners is not an unusually high figure — it represents barely half of one per cent of all EOBI pensioners — the Rs2.79 billion paid out to these ineligible people is significant when we consider that without a government injection or massive reforms, the fund is projected to run dry by 2030.

Beyond cooperation with NADRA on verification of pensioners' information, the government also needs to prosecute fraudsters to the fullest - it is highly unlikely that anyone could accidentally apply for EOBI benefits or not notice they were receiving the payments.

As for funding, the EOBI contribution model is much lower than similar plans in other countries. Making the fund sustainable will require either increasing the amounts that employers and employees contribute, or having the government start paying into the pension programme again.

Another option is allowing people to willingly contribute larger amounts with the expectation of larger payouts when they become pension-eligible, but this is unlikely to be a realistic option as long as the fund's long-term future is up in the air.