1. Maldives MPAO:
a Case Study
in Administrative Costs
Optimization
Oleksiy Sluchynsky
The World Bank
April 2013

2. Differences in costs across programs
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
Piblic schemes Private schemes
DB external
collection
DB in-house
collection
Publicly
managed DC
Privately
managed DC

3. Differences in costs across time
$40
$45
$50
$55
65,000 70,000 75,000 80,000 85,000 90,000
Costperbeneficiary
Total Staff of SSA
For the same 20 year period :
30% expansion in beneficiary numbers
25% reduction in staff
US Social Security Administration

4. Key findings from
administrative costs studies
 Significant economies of scale in benefit administration
 Labor costs is a major single component of costs. Overstaffing is
often a leading reason for inefficiencies
 Costs of benefit delivery remain high in some cases. As countries
develop, formal mechanisms tend to be utilized more often
 Evidence of cost savings from unifying collection of pension
contributions with taxes is mixed but there are emerging best
practices in collection management
 Young systems are more expensive, so need to have transition
financing strategies
 As economies develop they employ better technologies in both
systems and processes, which brings costs down

5. Maldives and MPAO
 Small island economy with highly disbursed population
 Population: 300,000, with 45 % under age 25
 Labor force: 150,000 with 30% in public sector
 GDP per capita = US$6,000
 New pension system introduced in 2009 consisting of
(i) basic pension, and (ii) retirement savings accounts (MRPS)
 MPAO was established to manage the new program
 The old rights of the civil servants calculated, converted to
recognition bonds, and registered in individual accounts
 The model is similar to Botswana (2001) and Kosovo (2002)

6. Economies of scale are important
 World: Fragmented programs often result in loss of efficiency. Reforms
with consolidation of public and private sector schemes (Jordan,
Ghana, Zambia, Cape Verde, USA. Plans in Iraq, Egypt)
 Maldives: MPAO has been tasked by law to
 administer retirement program for both public and private sectors
 manage both the DC plan and a universal basic pension scheme
 eventually, payments under several other Gov programs were
consolidated under the single MPAO management
4.94
2.61
2.08
1.62
1.38 1.27 1.21 1.17 1.14 1.11 1.09 1.08 1.06 1.05 1.04 1.04 1.03 1.02 1.02 1.01 1.01 1.00
-
1.00
2.00
3.00
4.00
5.00
6.00
Per-member costs relative to
per-member costs of a plan with 5m accounts

7. Labor costs
 World: In 13 out of 100 pension agencies in our study, staffing
levels were more than double the benchmark. In most of the
same countries overall administrative costs were also
significantly higher
 Several agencies recently went through complex restructuring:
Marshal Islands SSA (2003), Uganda NSSF (2010),
Afghanistan PD (2011), resulting in 40% staff reduction
 Maldives: Both staffing and costs are less than half the
benchmarks. MPAO pays salaries above the public sector pay
scale to attract qualified staff. However, MPAO has only a
central administration and services in islands are limited

8. Benefit delivery
 World: Formal means of payments are increasingly becoming a
common practice. Experiments with reduced payment frequencies,
joint accounts, pre-payments to banks, mobile payments and mobile
phone payments are common
 Maldives: All individual benefits are paid in banks, monthly, at zero cost
0%
20%
40%
60%
80%
100%
120%
$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000
Bankpayments
GDP per capita
AZE
JOR
KOS
MDV
PHL
THA-GPF
IRL

9. Contribution collection: World
 Practices of collection vary. A lot of inefficiencies exist:
 Employers report to multiple agencies with multiple forms
(Personal tax; OAI, HI, UI, Statistical office)
 Multiple identification mechanisms
 Inefficient, duplicative, and costly effort of reconciliation,
monitoring, and enforcement
 High cost of compliance for employers
 Some countries opted for joint collection with personal taxes.
But evidence of cost savings is mixed
 Details of the process matter. Where unification is not
possible or desirable, a lot can by done to harmonize
systems (e.g., unique ID, electronic submission, etc.)
 It is multi-dimensional problem: PI-tax and pension
contributions; various social security contributions; 1st and 2d
pillar pension contributions

10. Contribution collection: World
 Electronic filing is becoming increasingly common:
 Improved flow of quality data to the pension agency
 Instant validation and expedited reconciliation
 Introduced in phases. With large employers, quality of data
for most members is ensured
Armenia
Czech
Republic
Chile
Hungary
Kosovo
Maldives
Mexico
IMSS
Moldova
Morocco
Philippines
St.Chris.&
Nevis
United
Kingdom
Mandate NA NA Voluntary NA
100+
emp’ees
All NA NA NA NA NA Yes(*)
Participating
employers
0.8% 15% NA 2% 8% 100% NA NA 8% 23% 1% 98%
Covered
employees
17% 48%
Around
80%
71% 49% 100% >60% 75% 26% 74% 4% NA
E-payment
available
NA NA Yes NA No(*)
No Yes NA Yes NA NA NA
(*) In UK, e-filing was made mandatory for large employers (250+ employees) in 2004/05; then for medium
employers (50-250 employees) in 2005/06; and then for small employers (<50 employees) in 2010.

11. Identification
Filing
Payments
Financial
Management
Implementation
Self-employed
 Unique national ID is used
 All employers of all sectors and sizes are required to report
electronically using web platform before payment is made
 No payment can be accepted without filed and confirmed
return with information on individual contributions, subject to
confirmation by the bank accepting payment
 Designated Collection account and special Custodial account
where all confirmed payments get periodically transferred
 In phases: public sector first and private sector after one year
in operation
 Policy on participation is being developed. Planned for 2014.
Incentive schemes are being discussed.
Contribution collection: Maldives

12. Financing
 New schemes require both start-up and recurrent financing
 Financing through charges initially is limited as membership base
and assets are still low. Excessive charges in the early years are
unfair for the transition cohorts. Often subsidies come from the
state budget
 Both Maldives and Kosovo legislated 1% initial limit on asset
charges. Major component of the start-up costs was establishing
a new MIS system
 Both Maldives and Kosovo have projected/reached break even
point in financing within 5-6 years of operation. Consequently,
statutory charges by Kosovo KPST have declined to the current
0.6% (including investment management fees)

13. Thank you!
References:
 Maldives Pension Administration Office
http://pension.gov.mv/en/
 Kosovo Pension Savings Trust
http://www.trusti.org/index.php/en/home
 Botswana Public Officers Pension Fund
www.bpopf.co.bw/