EGYPT'S Cabinet has proposed a law to raise the retirement age by five years to 65 and to make other pension changes that the Finance Ministry said would help boost the savings rate and improve growth prospects. Analysts said the overall changes would help cut the Government's existing pensions deficit. The draft reform raises the retirement age for those joining the job market from 2012, an official said. Parliament, dominated by the ruling National Democratic Party, must approve the draft before it becomes law. "The new pension law will raise Egypt's savings rate from 14 per cent to 18 per cent of gross domestic product, leading to growth of at least 9 per cent," Finance Minister Youssef Boutros- Ghali said, according to Al-Ahram report. The economy is now growing at about five per cent a year but was expanding at about seven per cent before the financial crisis. Beltone Financial analyst Reham el- Desouqi said she had yet to see details of the plan but expected it to increase the number of people saving for retirement in the country of 80 million. "The new law is expected to have a significant impact on the budget when fully implemented. In terms of the savings, it will allow the government to make on its payments to cover the current deficit in the pension system," Beltone wrote in a note. "The implementation of a new pension system, in parallel with the existing system, will also allow better management of the pension funds, with the possible investment of pension funds in the stock market, and grant higher pensions to employees after retirement," Beltone added. Two-thirds of each individual's pension fund would be invested in Government bonds and the rest in other investment funds, Assistant Finance Minister Mohamed Maait told Reuters. The draft also gives Egyptians covered by the scheme welfare benefits for six months if they lose their job, he said. Monthly payments would decline by four per cent a month during the period while they were looking for a new job. "For the first time, the new law will give insured Egyptian citizens unemployment welfare, being in the range of 60 per cent of the last wage received ... My responsibility is to provide a stable income for 6 months," Maait said. The employer would make related insurance payments and an employee would be eligible for benefits provided payments were made in the previous 12 months. Employers would be punished by fines or imprisonment for failing to make such payments.
