Skip to main content
main content, press tab to continue
Article | Global News Briefs

Bahrain: Social security pension reforms

By Steve Clements | September 23, 2022

Social security reform in Bahrain will impact the pension benefit formula and social security contribution rates, but timing is uncertain.
Health and Benefits|Ukupne nagrade |Retirement
N/A

Employer Action Code: Act

Amendments to the social security law were announced in Bahrain, raising social security contribution rates (primarily for employers) for retirement, survivors' and disability pensions; revising the pension benefit formula and the basis for increasing pensions in payment; and requiring that the mandatory employer end-of-service benefits be paid via the Social Insurance Organization (SIO).

Key details

Many details are not yet available on the specific content and timing of the changes, but expected key changes include:

  • Raising gradually the employer contribution rate for retirement, survivors' and disability pensions to 20% of pay up to 4,000 Bahraini dinars per month; the first step was a two-percentage-point increase, to 14%, in May 2022, to be followed by annual one percentage point increases on January 1 in years 2023 to 2028. The employee contribution rate will increase to 8% (currently 7%) in January 2023.
  • Revising the earnings averaging period in the pension calculation, from the last two years to the last five years before retirement.
  • Increasing normal retirement age (NRA) for women to age 60 (currently age 55). Also, the minimum period of insured employment to collect a full pension at NRA will be 240 months (previously 120 or 180 months).
  • Creating an incentive to defer pension commencement by up to five years past NRA; the pension of those who do so will be up to 90% of covered earnings averaged over five years, versus 80% of covered earnings averaged over two years.
  • Establishing a new method for increasing pensions in payment, which links increases in benefits to the financial status of the social security fund. The fund will have to be in surplus in order for benefit payments to increase. Prior to the pandemic, pensions were automatically increased by 3% annually, but the increases were suspended in 2020 and 2021.
  • Requiring employers to deposit funds with SIO, on employee termination, to fund the mandatory employer-paid end-of-service benefits for all employees. There is no change to the benefit calculation. Note: For Bahraini/Gulf Cooperation Council nationals, the end-of-service benefit applies only to monthly pay greater than the wage ceiling, if any.

The amendments also increased monthly pensions in payment by 60 dinars per month, effective retroactive to January 1, 2021.

Employer implications

As most of the workforce in the private sector is composed of foreign nationals who are covered only by workers compensation and unemployment insurance, the immediate impact of the changes is expected to be modest. Requiring employers to meet their end-of-service benefit obligation via payment to SIO, which then pays the employee, is intended to ensure that employees receive the money they are due at the end of service. More substantive changes to social security and end-of-service benefits may result from the implementing regulations, but there is no clear timetable for when they will be issued.

Contact us