This document proposes a non-contributory pension scheme for the elderly in Lebanon. It summarizes the objectives and need for such a scheme given that 80% of elderly Lebanese over 65 do not have pensions and rely on family support. It then outlines Lebanon's existing social security schemes and their limitations. Several options for a non-contributory pension scheme are proposed, estimating the number of beneficiaries, pension amounts, and total costs. Financing options through the national budget are discussed. The scheme aims to alleviate poverty among the elderly and complement existing social security.

1. Non Contributory Pension for the Elderly in
Lebanon
Mounir Rached, Ph.D.
Vice president, LEA
May 31st, 2012
1

2. Contents
 Motive & objective
 Current Social Security Schemes
 A Non-contributory scheme for
the elderly
2

3. I. Objectives
 Secure a social safety scheme for the elderly
 80% of elderly 65+ don’t have any pensions
 Vulnerable segment- depend mostly on
donations/family support
 Prevalence of poverty among elderly
3

4. 4

5. 2. Lebanon’s Social Security Scheme-NSSF
Mandatory
 NSSF Branches: employer Contribution
 Health & Maternity Insurance (HMI) 7 %
 Family & Educational Allowances (FEA) 6 %
 End of Service Indemnity System (ESI) 8.5 %
 Employee contribution 2 %
5

6. NSSF
 Total cost 23.5% of wages
 Relatively very expensive
 Share of employer (91%) is very high
 Induces fraud- damages credibility of scheme
6

7. NSSF
-Indemnity benefits (ESI).
 At retirement
 Lump-sum payment
 1 month/year of service up to 20 years
 After 20 years of service, 1.5 months /year
of service.
 Health scheme is terminated
 All benefits stop
7

8. NSSF Cont.
 Health segment is in deficit
 Subsidized by government: USD 100 million in 2012
8

9. Public Sector pension
Generous but unsustainable pension scheme
 budget cost contribution:
3.2% of GDP
Public employees’ contributions : 6% of wages
Accrual benefit rate per year:
 Civil Servants: 2.13%
 Military pensions: 2.66%
9

10. Lebanese Universities
 Lebanese Universities (not comprehensive)
Contributions : 5-11% of employee’s earnings –
Benefit: end of service indemnity-one month for
each year
10

11. Private School’s Solidarity Pension Fund
Annuity option – up to 85% of last salary
Indemnity Benefits:
 1 month salary for 1st 10 years
 2 months salary for each of the following 20
years,
 3 months salary for each year beyond the 1st 30
years.
 Health benefits
11

12. Cont.
Contribution:
 6% of salary by members,
 6% contribution by the school
B. The solidarity fund is a health and services plan.
12

13. Syndicates Schemes
 Lawyers, engineers, physicians, pharmacists, etc.
 Defined percentage contribution
 Benefit: pension & health
13

14. 3. A Non-contributory scheme for Lebanon
- Background
 Non-contributory pensions provide adequate
protection for low-income and poor rural residents
 40% of income per-capita/75% of minimum wage
 Is complementary to the current Lebanese Social
security scheme or revised scheme.
14

15. Target
 Targets low income groups by elimination
15

16. 3. Cont.
 International Experience:
 Argentina :
 Reduced household poverty rate by 31%
 Reduced extreme household poverty rate by 67%
 Costa Rica:
 The economic status of 15% of beneficiaries has been
improved
16

17. 3.Cont..
 Bolivia:
 Beneficiaries increased food consumption 165%
 Brazil
 80 to 90% of rural beneficiaries’ households, social security
benefits were responsible for at least 50% of the monetary
household income
17

18. 3. Cont..
Based on International Experience, the Non-
Contributory Scheme is able to provide the
following;
 Alleviate Poverty
 Provide Access to and substitution of social services
 Promote the quality of life
 Support of the local economy.
18

19. 3. Cont..
 Improve Housing
 Ensure Agricultural development
 Reduce rural-urban migration
 Responsible for Changes in social roles.
 Redistribute Regional income
19

20. 4. Budgetary Implication
20
Population above 60 years old by age group, 2006, 2011
Age Group 2006 2011
60-64 112,736 124,148
65-69 97,813 102,301
70-74 77,877 82,973
75-79 52,083 59,068
80-84 28,110 32,903
85+ 16,099 17,434
Total 60-85+ 384,718 418,827
Total 65-85+ 271,982 294,679
Total population 3,784,779 4,055,922
60 + as percent of total 10.16 % 10.32%
65 + as percent of total 7.2 % 7.3%
Source: H.A Abou Rizk, Population Conditions in Lebanon, 2003

21. 21
Option I: Full Coverage for 65+based on 2011 data
Pension
per person
Monthly USD
Pension
per person
Annual USD
Pension
per capita
GDP
(%)
Total cost
per annum
USD (000)
% of
GDP
75% of min wage 337.5 4,050 38.118 1,193,449 2.8
50% 225 2,700 25.412 795,633 1.9
30% 135 1,620 15.247 477,379 1
Total pensioners 294,679
Percent of population 7.3
Minimum wage-USD 450
GDP 2011 USD(000) 42,500,000
Population 4,000,000
Per capita GDP USD 10,625
Expenditure/GDP 31%

22. 22
Option II: for 65+
Pension
per person
Monthly USD
Pension
per person
Annual USD
Pension
per capita GDP
(%)
Total cost
per annum
USD (000)
% of GDP
75% of min wage
337.5 4,050 38.1 888,622 2.1
50% 225 2,700 25.4 592,415 1.4
30% 135 1,620 15.2 355,449 0.8
Total pensioners
294,679
Percent of population
7.3
Minimum wage-USD
450
GDP 2011- USD(000)
42,500,000
Population 4,000,000
Per capita GDP 10,625
Deductions:
Civil service
security
25466
49800
Net beneficiaries
219,413

23. 23

24. 24

25. Option V for 70+
Pension
per person
Monthly USD
Pension
per person
Annual USD
Pension
per capita
GDP
(%)
Total cost
per annum
USD (000)
% of GDP
75% of min wage 337.5 4,050 38.1 621184 1.5
50% 225 2,700 25.4 414123 1.o
30% 135 1,620 15.2 248,473 0.6
Total pensioners 192,378
Percent of population 4.8
Minimum wage-USD 450
GDP 2011- USD(000) 42,500,000
Population 4,000,000
Per capita GDP 10,625
Deductions:
Civil service beneficiaries 27,163
Syndicates 4,028
Residency requirement (5%) 7,808
Net beneficiaries 153,379
25

26. 5. Financing
 From the budget through stream- lining expenditure
 Transfers in 2012; LBP 3,728 billion = USD 2.4 billion
 Pension cost (70+) USD 622 million
25% of transfers
2.5% of total government expenditure in 2012
4.2% of revenues
26

27. 6. Administrative Arrangements
 Integrated within the MOF
27

28. 7. Health services
 Government health services through pub. hospitals
 Private schemes
$ 70 to $ 80 annual cost
 Government’s global health insurance plan
 Separate health and pension schemes
28