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FIAP > Destacados Boletines > Egypt implements major changes to its social security system.
17 April, 2020

Egypt implements major changes to its social security system.

On January 1, 2020, the government implemented a new law that makes major changes to the country’s social security pension system, including coverage, financing, qualifying conditions, benefit formulas, and benefit adjustments. The new law (Law No. 148 of 2019) replaces many existing social security laws and regulations, and consolidates several different social insurance programs into one. Key provisions of the new law affecting old-age pensions (effective as of January 1) include:

  • Covered workers: The unified program covers 26 categories of workers, including public and private sector employees, public officials and self-employed workers. Ten of the 26 categories previously lacked social security coverage; these 10 categories include mainly irregular and seasonal workers (e.g. fishermen, overland transportation employees and domestic workers) and small employers (e.g. owners of environmental, rural and family industries).
  • Contribution rates: Worker and employer contribution rates are 9% and 12% of monthly gross salary, respectively (previously, workers’ and employer contribution rates were 10% and 15%, respectively). Workers’ and employers’ contribution rates will each increase by 0.5 percentage points every 7 years until the combined rate reaches 26% by 2055.
  • Qualifying conditions: While the official retirement age remains unchanged at 60 for the time being, it is scheduled to increase to 61 on July 1, 2032, and by an additional year every 2 years thereafter, until it reaches 65 in 2040. The minimum number of months of contribution required to qualify for an old-age pension at the official retirement age will also increase from 120 months to 180 months by 2025.
  • Early retirement: As of 2025, an insured person may claim a reduced old-age pension at any age prior to the official retirement age, if he or she has at least 300 months of contributions (currently 240 months) and is entitled to a monthly pension that is at least equal to the minimum monthly pension, or 50 percent of his or her last monthly income, whichever is greater.
  • Benefit formula: The old-age pension replacement rate is still 2.22% of the insured’s average annual income for each year of contributions, but average annual income is now calculated based on the insured’s lifetime income (adjusted for inflation) rather than their last 2 years of pre-retirement income. The new formula only applies to periods of employment from the date of implementation of the new law. (The above formula still applies to periods of employment prior to the implementation date).
  • Minimum and maximum pensions: The minimum monthly pension is 65% of the minimum monthly income used for calculating contributions. The maximum monthly pension is 80% of the insured’s average monthly covered income, or 80% of the maximum monthly income used for calculating contributions, whichever is less.
  • End-of-service benefit: The new law replaces the Social Security End of Service Benefit with one based on individual accounts. To finance the benefit of the individual account, workers and employers each contribute 1% of the total monthly income covered, or 1% of the payroll. When an insured person retires, he or she receives the balance from his or her account (total contributions plus accrued interest) as a lump sum. The new benefit only applies to periods of employment from the date of the implementation of the new law. (The above benefit still applies to periods of employment prior to the implementation date).
  • Benefit adjustment: The pension amount is automatically adjusted in July of each year, based on changes in the national consumer price index, with a maximum annual increase of 15%. (Previously, adjustments were made at the discretion of the authorities).

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