Development of the Iraqi Public Pension System

By Matthias S. Klein, Niqash

September 8, 2006 

The public pension system in Iraq comprises ca. 15% of the Iraqi labor force and also all military and security forces. Civil servants, the military and security forces, and employees in state-owned enterprises are members in the State Pension System (SPS) totaling 1.1 million. Workers and employees in the private sector are supposed to enroll in the Social Security System ( SSS ), but only 76,000 have actually done so, representing only 1% of the labor force. Accordingly, 85% of the Iraqi labor force is not part of the pension system.

Under the old regime, the pension payment system was staggered and ranged from 5,000 to 8,000 IQD per month (15-24,000 IQD per quarter) depending on service years and number of dependents.

Right after the 2003 War, the Coalition Provisional Authority (CPA) replaced the old system with a "flat rate". For the April-June 2003 quarterly period, every pensioner received a payment of $40 (ca. 60,000 IQD). Then the CPA raised the rate to $60 for the July-September 2003 quarterly period. Finally, on 25 October 2003 the CPA announced that for the October-December quarter of 2003, the rate would be raised to 90,000 IQD (ca. $60) and that a "Ramadan Bonus" of 30,000 IQD (ca. $20) would be added to that.

Those regulations applied to all public sector pensioners registered with the Pension Administration of the Ministry of Finance, private sector pensioners, family benefit recipients, public sector pensioners registered in the Kurdish region, and recipients of the benefits for Anfal victims, disabled and families of martyrs in the Kurdish areas.

In 2004 the system changed. It continued to apply only to employees of the Iraqi public sector. All others (private sector pensioners, family benefit recipients, public sector pensioners registered in the Kurdish region, and recipients of the benefits for Anfal victims, disabled and families of martyrs in the Kurdish areas) were now to be dealt with by the different responsible ministries. Thus, after its inclusion after the 2003 War, the Kurdish region was taken out again, as was the private sector.

The public pension system was shifted from a "flat rate" to a "staggered rate" system:

Classes of Pensioners (Minimum pensions 1st Quarter 2004)

Full pension (more than 25 service years) - 125,000 IQD

Full pension (more than 15 service years) - 110,000 IQD

Beneficiary payment (1 dependent) - 95,000 IQD

Beneficiary payment (2 or more dependents) - 100,000 IQD  

On 30 April 2004, CPA Order #84 decreed that the old Civil Pension Law (33/1966) be changed so that

"There shall be deducted from the pay of an official the contribution towards the pension for the period of his pensionable service according to the following rates, provided that no deduction shall be made for any period in which his service was not a pensionable one nor for periods of leave enjoyed without pay, nor for periods of leave at half pay. These rates shall be applied on the period of service that started after the date of the coming into force of this Law.

(a) 1% of the salary, if the official’s gross salary was 69,000 dinars or more, but less than 204,000 dinars.

(b) 4% of the salary, if the official’s gross salary was 204,000 dinars or more, but less than 574,000 dinars.

(c) 7% of the salary, if the official’s gross salary was 574,000 dinars or more, but less than 1,500,000 dinars.

(d) 10% of the salary, if the official’s gross salary was 1,500,000 or more."

By August 2005, pensions had been raised and the system had become more complex. Monthly pensions ranged between 80,000 IQD ($53) and 200,000 IQD ($133). Also, the pension system again covered the private sector.

Before the passage of the "Unified Retirement Law" (Law 27/2006), the regulations for the public pension system were the following:

State Pension System (SPS) for employees in the public sector and state-owned enterprises

- eligibility age is 60 years for both men and women

- minimum period for contribution payment is 15 years

- early retirement is possible, for men at age 55 (with 30 years of service) and for women at age 50 (with 25 years of service)

- delayed retirement is possible, but at the age of 63 retirement is compulsory

- anyone who does not meet the conditions (age and/or number of years in service) will receive a lump sum based on one month's pension multiplied by years of contribution

- pensions are calculated based on the last monthly wage (average in Iraq : 243,000 IQD)

- maximum pension amount is 75% of reference wage + 5% per dependent, but total not exceeding 90%

Social Security System ( SSS ) for workers in the private sector (companies with min. 3 employees)

- eligibility age is 60 years for men and 55 years for women

- minimum period for contribution payment is 20 years

- early retirement is possible at any age after a minimum of 30 years of contributions - there is no compulsory retirement age

- anyone who does not meet the conditions for receiving full pension (age and/or number of years contributed) will receive a lump sum based on the average monthly wage of the last 3 years multiplied by years of contribution

- pensions are calculated based on the average monthly wage of the last 3 years (average in Iraq : 45,000 IQD)

- there is no maximum pension

Sources:
- CPA Orders
- World Bank paper "Pensions in IRAQ : Issues, General Guidelines for Reform, and Potential Fiscal Implications"