Comoros Pension System Under Strain as IMF, ILO Call for Urgent Structural Reforms

A study by the International Monetary Fund and the International Labour Organization warns that Comoros’ pension system is facing growing financial pressure due to limited contributors, demographic changes, and costly benefit rules. Without a combination of reforms such as higher contributions, adjusted benefits, and better administration, the system’s deficits are expected to widen in the coming years.

The pension system of the Union of the Comoros is facing increasing financial strain, raising concerns about its ability to support retirees in the future. A recent study by researchers from the International Monetary Fund and the International Labour Organization examines the country’s pension system and highlights the urgent need for reform. According to the analysis, structural weaknesses, demographic changes, and limited participation in the formal economy are putting the system under pressure. Without reforms, the gap between contributions and pension payments is expected to widen in the coming years.

The study notes that social protection coverage in Comoros remains extremely limited. Only a small share of the population receives any form of formal social protection. A major reason for this is the dominance of informal employment, which accounts for nearly 88 percent of the workforce. Workers in informal jobs usually do not contribute to pension schemes, which reduces the number of people paying into the system and weakens its financial base.

How the Pension System Works

The national pension system is managed by the Caisse des Retraites des Comores and acts as the country’s main formal safety net for retired workers. It is made up of three separate pension schemes covering civil servants, private sector workers and other non-civil servants, and members of parliament. These schemes provide benefits for retirement as well as financial support in cases of disability or death.

The system operates on a pay-as-you-go model. This means that contributions collected from today’s workers are used to pay pensions to current retirees. Unlike some pension systems in other countries, the Comorian system does not rely heavily on long-term investment reserves.

Contribution levels differ between the three schemes. Civil servants contribute about 17 percent of their wages, private sector workers contribute eight percent, and members of parliament contribute around 26 percent. The rules for qualifying for pensions also vary. Civil servants and private sector workers must usually contribute for at least fifteen years before receiving pension benefits, while parliamentarians can qualify after just five years of contributions.

Unequal Rules and Financial Imbalances

Differences in pension rules have created significant financial imbalances within the system. Civil servants accumulate pension benefits at a rate of two percent of salary for each year of service. Private sector workers accumulate benefits at a lower rate. Members of parliament, however, receive much more generous benefits, with pensions growing at five percent of salary for every year of service.

Another feature affecting costs is the way pensions are calculated. Benefits are based on the average salary from the final six months of employment. Because wages often rise toward the end of a career, this short reference period can lead to higher pension payouts compared with lifetime contributions.

These factors have made some schemes more expensive than others. The civil servants’ scheme accounts for the largest share of pension spending and generates the biggest deficits. The parliamentary scheme also faces financial challenges because it has a very small number of contributors but relatively generous benefits.

Demographic Changes Add to the Challenge

Population trends are making the situation more difficult. Pension systems that operate on a pay-as-you-go model depend on a healthy balance between workers paying into the system and retirees receiving benefits. In Comoros, this balance is changing.

The number of retirees is increasing as people live longer and reach retirement age. At the same time, the number of contributors is growing slowly. Hiring restrictions in the public sector have limited the number of new civil servants joining the system. Weak enforcement of contribution rules has also prevented many private sector workers from registering.

As a result, fewer workers are supporting a growing number of pensioners. Financial data already shows signs of stress, with pension payments and administrative costs exceeding contributions in recent years. The government has had to provide temporary financial support to ensure that pension payments continue.

Reform Seen as Essential for Stability

Experts say that without reforms, the financial gap in the pension system could grow significantly over the next decade. To address this risk, researchers evaluated several possible reform measures.

One option is to increase contribution rates so that more revenue flows into the system. Another option is to reduce the rate at which pension benefits grow each year, which would help control future costs. Extending the salary period used to calculate pensions could also make benefits more closely reflect lifetime earnings rather than final salary increases. Gradually increasing the retirement age is another measure that could reduce the number of years people receive pension payments.

The analysis suggests that no single reform will solve the problem on its own. Instead, a combination of policy changes will likely be needed to improve financial stability.

Researchers also stress the importance of strengthening the management of the pension system. Improving contribution collection, expanding coverage among private sector workers, and modernizing administrative systems could all help strengthen the system’s finances.

Ultimately, the future of the pension system will depend on strong political commitment and cooperation among government institutions, employers, and workers. Ensuring that the system remains sustainable is essential for protecting retirees and maintaining trust in public institutions in the years ahead.