Towards an Inclusive, Equitable and Sustainable National Pension System in Iraq

A pension system is at the heart of social protection. By ensuring income security for older persons and other vulnerable groups, it prevents poverty, reduces inequality, and facilitates consumption smoothing. A pension system also affects the working population’s labor market choices and has important fiscal implications. Iraq’s current pension system is highly fragmented, inequitable, and inefficient, and a comprehensive pension reform is urgently needed.

Based on collaboration between the IMF, ILO and the World Bank this policy note aims to: 1) Provide an assessment of the existing public and private pension system across the four dimensions: fiscal sustainability; labor market implications; coverage; and adequacy of benefits. 2) Develop and propose options to adjust the pension system with a view to making it fiscally sustainable, more inclusive and adequate, and conducive to private sector development and labor market formalization. 3) Provide a basis to engage key stakeholders—including workers, employers organizations and the civil society—on strategies to achieve a more inclusive system, importantly by including workers in the informal economy, female workers, workers with disabilities, and other disadvantaged groups.

A holistic approach to the pension reforms in Iraq should combine efforts at enhancing equity, adequacy, and sustainability of the contributory system, with efforts to extend protection to those who remain excluded, especially women. This approach can broaden political support for the whole reform package and is in line with recent commitments taken by the Government of Iraq through the ratification of ILO Convention No. 102. The proposed reforms deliver on key interrelated objectives. At the same time, they ensure that replacement ratios are more aligned between the public and private sectors, and across future cohorts of pensioners; that a system of regular pension indexation maintains benefit adequacy over time; that coverage of private sector workers is expanded; that incentives for contribution throughout working life are in place and the pension system fosters economic participation and formalization; and in the case of the Pillar 0 pension, that those without pension income in old age are also covered.