Pension System Basics — Understanding the Maldives Retirement Pension Scheme

The Maldives Retirement Pension Scheme (MRPS) is a contributory pension system that was established in 2009 to help individuals plan for a stable retirement. Let’s explore some key features of MRPS and why it’s becoming a popular choice for securing a tranquil retirement.

How it Works

It operates on a monthly contribution basis, where employees contribute 7%, and employers match that amount, resulting in a total contribution of 14% from one’s basic salary.

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These contributions are invested to maximize their value and grow over time. Each member has a Retirement Savings Account (RSA), where contributions and returns on investments are credited. Members can easily track their RSA balance through the Koshaaru portal or the pension office mobile application.

Why is the Pension System Important?

Pension systems, like MRPS, play a crucial role in securing an individual’s financial future after retirement. Regular contributions help employees build a substantial corpus to support their post-retirement lifestyle. With increasing life expectancy and changing support systems, having a robust pension plan has become more essential than ever.

Moreover, a well-established pension system benefits the overall economy by promoting financial stability among retirees. This, in turn, reduces the burden on government welfare programs and enables more efficient allocation of resources. Retirees with secure pensions are more likely to contribute to the economy through consumption and investments, thus boosting economic growth.

Are Withdrawal Restrictions Necessary?

It’s important to understand that pension savings differ from typical banking arrangements. In MRPS, contributions stop at the age of 65 years, and members can start withdrawing their pensions at this age. The withdrawal amount depends on the balance in their RSA.

The purpose of these withdrawal restrictions is to ensure that individuals have sufficient funds to sustain their livelihood during retirement. By limiting withdrawals, MRPS protects against the risk of members exhausting their pension savings prematurely and facing financial hardships in their golden years.

Objectives of MRPS and How It Strives to Achieve Them

The primary objective of MRPS is to encourage responsible saving among employees, ensuring their financial security in retirement. To achieve this, the scheme operates with a long-term investment horizon, striving to grow pension savings while providing protection against sudden declines in value close to retirement.

MRPS adopts a prudent investment strategy, aiming to preserve the capital value of member contributions while outpacing domestic inflation. MRPS offers investment options through MRPS Investment Portfolio and a Sharia Portfolio.  Members who opt for Investment Portfolio can invest their funds in a range of securities allowed under the Maldives Pension Act, whereas Sharia Portfolio is exclusive to Sharia-compliant investment options.

In conclusion, the Maldives Retirement Pension Scheme (MRPS) is a valuable tool for securing your financial future after retirement. With mandatory contributions and prudent investments, MRPS strives to provide retirees with a sustainable income stream during their golden years.

To learn more about MRPS, contribution guidelines, and enrollment, visit the Pension Office website: https://members.pension.gov.mv.