Morocco's pension coverage is provided by six basic schemes and three supplementary schemes. The main existing pension schemes differ from each other in terms of their legal status, management methods, and resources and benefit arrangements.
They also differ according to their functioning (pay-as-you-go or fully funded) or by the type of benefits that are served (defined benefits or defined contributions)
Pay-as-you-go plan :
The pay-as-you-go system is the one that works today in most basic plans. This system is based on a contract between the generations: today's assets pay the pensions of today's retirees, and it is the assets of tomorrow that will in turn finance the pensions of today's assets. . It is based on the principle of equivalence, at all times, between the contributions paid by the assets and the pension benefits paid to all pensioners.
Fully Funded plan :
This system provides for retirement pensions to be financed by savings accumulated by contributors. The contributions paid by the assets are deposited. These investments (in movable or immovable assets) and their income are used to pay pensions. Capital funding is a technique that can be implemented by both private insurance companies and pension plans. Each asset finances during his working life, his own retirement. There is equivalence between the present value of pre-retirement contributions and the present value of post-retirement pensions.
Defined benefit plans (Primacy of benefits) :
In this pension plan, the benefits are fixed first. They are expressed on the basis of a calculation base which can be for example the last insured salary or the average of the last three insured salaries.
In reality, the retirement pension is never equal to an unchanging overall percentage. It is generally expressed in terms of the number of years of insurance and an annual percentage.
The disability pension is most often expressed in terms of the number of years of insurance possible until retirement and the insured salary at the time of the occurrence of the disability.
The commitment is made to pay, at retirement, a percentage of the salary on a basis calculated in advance. There is no risk on the amount of the future pension.
Retirement pension = 2.5% * number of years of contribution * average salary of the last 3 years
- The advantage of this system is transparency: the insured are perfectly aware of the level of the benefit they will receive.
- The defined benefit plan is therefore a plan in which the replacement rate of the salary at retirement is defined in advance.
- On the other hand, for such pay-as-you-go plans, contribution rates must adjust according to the parameters of the moment to deal with the payment of benefits.
- These plans are characterized in some way by an obligation of result.
Defined Contribution Plans (Primacy of Contributions) :
A contributory plan is a pension plan that sets the contributions first. Then, based on the total contributions and the financial income generated by these contributions, the benefits that can be financed by these contributions are calculated.
- In these plans only the level of contributions is fixed; the amount of the future pension remains uncertain as a function of future financial returns.
- The pensions received no longer depend on a fraction of the salary but rather on the amount of contributions paid.
- These plans are rather based on a savings perspective.
- The advantage of such plans is cost control but in return, the insured cannot know with certainty the actual level of benefits that will be allocated. It is therefore a system in which the replacement rate of pensions is strongly correlated to the contributions paid.