Saudi retirement foundation loses reserves and blames rise in staff salaries

Saudi Arabia’s General Retirement Foundation (GRF) has said that its reserves held to pay the pensions of former civilian and military officials have been depleted. The foundation attributes this deficit to the government’s raising of staff salaries a few years ago. Members of the Saudi Shura Council expressed their surprise at the explanation provided by the foundation in its latest report.

The GRF has asked to impose mandatory deductions of 5 per cent from salaries to tackle the deficit. The request has attracted strong criticism that the organisation has failed in its investment decisions. These include 30 billion riyals invested in the faltering King Abdullah Financial City as well as the stock market. The council members expressed satisfaction at the decision by their own Human Resources Committee not to recommend such deductions which could be lost in future by the foundation’s weak investment policy.

The comments were made during a heated Shura Council session, in which the members despaired that the Minister of Civil Service would ever be in a position to improve the GRF’s investments. They asked for the GRF funds to be transferred to the office of the Minister of Finance, under the control of a committee chaired by him along with representatives of the GRF and the Civil Service, who attended the meeting as observers.

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“The General Retirement Foundation indicated that one of the most important reasons for increasing the average pension has to do with the increased of state salaries several years ago,” said Shura Council member Dr Ahmad Al-Ghamdi. “This was a matter that had a positive impact on their pensions and had a negative impact on the revenues and obligations of the Foundation.” The increase in the salary of state employees took place several years ago and only once, he pointed out, the only rise in the past thirty years.

Such an increase in salaries was met by an increase in the sums of money deduced from the employees toward their retirement contribution. The higher the salary the higher is the deducted sum of money. As such, this increase in salaries was not the most important reason for the increase in the obligations of the Foundation toward pensioners.

It is likely that the number of pensioners and beneficiaries may double during the next ten years, added Al-Ghamdi. “Due to the inability of the GRF to meet its future obligations, it is important for it to review its current investment strategies in order to find out to what extent it might be possible to turn them into new projects and investments that result in higher revenues.”

He asked the council to consider the size of the organisation’s investments, estimated to be about 742.3 billion riyals by the end of 2015. “Despite the distribution of this huge sum of money in local and foreign investments, its investment review seems rather low compared with the investments of similar companies and retirement foundations.”

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