Khaberni - At a time that coincides with the escalating discussions about the Social Security Law project, Dr. Mohamed Abdelkader released a specialized analytical study entitled "So the compass of the discussion does not deviate", which sheds light on the fundamental challenges facing the sustainability of the system, and calls for reformulating the methodological thinking in any upcoming legislative amendments.
The study confirms that the social security system is one of the most important pillars of economic and social stability in Jordan, as it manages the largest national savings fund, making any flaw in its financial sustainability a matter that affects the overall economy and the future of generations.
Shift in Growth Sources
The study results indicate a structural shift in the growth sources of the Social Security funds' investment. After the growth during the period (2003–2017) had mainly depended on insurance surpluses, these surpluses began to decline significantly, losing about 50% of their levels compared to 2017.
In contrast, investment returns have emerged as the main driver of growth since 2019, in a clear transition from a model based on subscriptions to one relying on investment performance. However, the study points out that these returns have not achieved sustainable superiority over low-risk alternatives, such as bank deposits, raising questions about the efficiency of investment management.
Increasing Demographic Pressures
The study warns of escalating demographic challenges, most notably the slowing population growth and declining pace of new subscribers' entry, against an expected rise in the number of retirees. Estimates suggest that the ratio of subscribers to retirees might drop to about 1.5 subscribers for each retiree by the year 2100, putting additional pressures on the system.
Governance Imbalances
On the governance front, the study observes several points, including limited rotation of auditors, the absence of clear indications in audit reports regarding going concern doubts, in addition to relying on periodic actuarial studies without having integrated real-time systems to measure financial sustainability.
Criticism of Actuarial Assumptions
The study raises questions about some of the assumptions stated in the latest actuarial study, including:
- The assumption of limited future economic participation of women, not exceeding 40%.
- Conservative population growth estimates.
- Relying on an investment return rate close to 4.7%, which is near the returns of low-risk investments.
The study believes that these assumptions do not align with national economic directions, necessitating their re-evaluation.
Call for an Integrated Sustainability Model
The study concludes that addressing these challenges requires adopting an integrated approach to managing financial sustainability, based on:
- Developing a dynamic model for financial sustainability that simulates the impact of any legislative adjustment before its approval.
- Enhancing investment governance and increasing the level of transparency and accountability.
- Developing early warning tools that provide real-time reading of sustainability indicators and link them to corrective actions.
- Restructuring the investment fund and diversifying sources of return.
The study also emphasizes that the national dialogue on the law is a positive step, however, the uniqueness of the Social Security Law requires that the discussion be based on accurate financial models, not on impressions or populist considerations.
