The Role of Occupational Pension Funds in Mauritius

Mauritius belongs to a select group of developing unfunded civil service scheme, occupational pension countries where contractual savings-savings with schemes cover about 100,000 employees or 20 percent insurance companies and pension funds-exceed 40 of the labor force.percent of GDP and represent a major potential force in All types of pension funds, including the public ones, the local financial system.Pension funlds account for 75 report low operating costs.This reflects the absence of percent of contractual savings.marketing and selling costs and, in the case of large Contractual savings institutions invest in government private pension funds, the assumption of some costs by securities, housing loans, corporate securities, real estate sponsoring employers.and bank deposits.They currently hold 35 percent ofThe investment performance of the self-administered government securities and also account for 36 percent of funds was less than fully satisfactory in the late 1990s, total outstanding housing loans.reflecting poor returns on the local and foreign equity Given their strong demand for long-duration assets, markets.Funds insured or administered by insurance they can stimulate the issue of long-term government companies as well the NPF performed better during this bonds (both inflation-linked and zero-coupon) anic the period because of their heavier allocations in government development of corporate debentures, mortgage bonds, securities and housing loans.However, over a longer and mortgage-backed securities.period, the private pension funds probably outperformed Mauritius has a balanced and well-managed multipillar the NPF.pension system.In addition to several publicThe regulatory framework, though fragmented, is not components, such as the Basic Retirement Pension, the unreasonable.It has many important provisions, such as National Pensions Fund (NPF), the National Savings observance of internationally acceptable accounting and Fund, and the Civil Service Pension Scheme, there are actuarial standards and minimum vesting and portability over 1,000 funded occupational pension schemes that rules, and it does not impose prescribed limits on play an increasingly important part in the whole system.investments.The funded schemes are divided into two main However, consolidation and modernization of the groups-those insured and/or administered by insurance regulatory framework is required, while supervision, companies, and those that are self-administered and are which is currently nonexistent, needs to be developed registered with the Registrar of Associations.and to be proactive.Coverage of the funded schemes is estimated at about 10 percent of the labor force.Together with the This paper-a product of the Financial Sector Operations and Policy Departrrient-is part of a larger effort in the department to study pension funds and contractual savings.