Retirement Strategies Assignment PDF

Running Head: Retirement Strategies
Retirement Planning Strategies in Morocco
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Retirement Planning Strategies in Morocco
Morocco is one of the economies being faced with the issue of people living at extreme
poverty and thus to ensure that these people are able to gain from the growing economy has
remained to be a greater challenge for the policy makers. According to Achy (2013), this
kingdom has imbalances in retirement schemes which has forced the government to study
alternative options. Due to the inability of the elder group to keep participating in the labor force,
they mostly remain without jobs, this creates a need to plan ahead (Shah & Canaan, 2016). These
elder group have many health issues and their productivity is also lower compared to the younger
group. Due to these reason, many are left with no jobs as they hit the retirement age. Taking a
notion that they need a stream of income to keep them going and for maintaining their daily
consumption and the health costs, the government introduced a retirement benefit program where
the younger people are force to save some proportion of their income for the future.
These funds are saved until one hits the retirement age and then a person is given a
stream of income for the rest of his/her life unless otherwise specified. These challenges are
better understood through research that may involve data collection and analysis. After the
establishment of these challenges, priorities should be set, creation of awareness on the possible
solution, and lastly is the measurement of progress. The traditional theory according to Shah &
Canaan (2016) assumes that people make rational decisions on their spending and saving,
however, this is not always the case as most tend to make decisions for their best interest.
Saving for retirement is one of the greatest asset that the elderly can have. The saving
may be either mandatory or it can be self-planned. There are certain ways in which the Morocco
government helps in ensuring that the employed save for their retirement. One is the pension
plan; in this plan, very little is expected on the saver and is thus considered the easiest retirement
plan. All the money and funds are contributed by the employer and are professionally managed
(Smith, 2015). The sole role of the saver in this case is to stay for long in the job till one hits the
retirement age so that one could be considered qualified for the pension. However, this is not
available for everyone. According to Sss.gov (2017), for one to qualify for the retirement
pension in Morocco, one has to be of age 60 and above, or 55 if have been a miner with five
years underground work experience, this person must cease working.
The pension scheme in Morocco is divided into three; for civil servants, for state owned
enterprises employees and for private sector workforce. The problem is that they bring inequality

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due to differentials in deductions. The pension plans are common for government and municipal
workers but in a corporate environment they are becoming less popular (Frankel, 2014). Smith
also noted that the pension plans have declined in generosity in that they fail to offer adjustments
in the cost of living. This means that, after retirement you will receive a monthly income equal
for all the years despite the inflation and other economic changes. This means that the retirement
benefits will be subjected to a loss of purchasing power and will force the retirees to choose a
lower lifestyle if they completely dependent on these savings.
Defined contribution plans is also another way of saving for retirement. Bond (2017)
noted that these contribution plans are meant to supplement retirement savings. In this case, the
saving is optional for the workers, they choose whether to participate or not, they choose their
appropriate plan, they set their saving amount and the time when they can change the plan. The
employers match certain portion of the workers contribution. The features of this plans makes
them more attractive to financial advisors. The disadvantage is that tax is payable upon
withdrawal since most are traditional (Lieber, 2018). However, there are exceptions to the tax on
withdraws such as those meant for first home purchase. The government also offers social
security programs to help the retirees such as retirement pension. This money is set aside when
the government is planning its budget and is an important transfer by the government.
The government utilizes financial institutions to make it easier for saving to take place.
The government’s role here is to regulate these financial institutions and ensuring that savings by
workers are managed effectively. The policy tools for the government and the central bank plays
an important role in the saving for retirements. Expansionary fiscal policy raises the disposable
income for workers leaving them with excess income which is transferred into savings. The
expansionary monetary policy of increasing money supply also has a similar impact. However,
the expansionary monetary policy of decreasing interest rate has a negative impact on retirement
savings. The savers need a favorable interest to induce them to save more; lower interest rate
discourages savings.
Pension and mutual funds are important in that they are allowed to receive the savings by
workers and give them at the retirement age with some interest growth. This is achieved by
taking the saved money and reinvesting them in a different market at an interest. Some of the
interest earned is the one given to the savers to compensate them for the value their saving lose

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over the years. The other proportion goes to the saving institution to cover for its service and
other costs.
According to Smith (2015), financial institutions are important in that they offer
insurance for retirement savings; these are guaranteed income annuities. For instance, the most
common is their feature of allowing both workers and non-workers to save some amount of
money periodically (usually monthly or quarterly). The institutions offer an environment in
which the savers are flexible on their savings and they also improve effectiveness of access.
The Moroccan Retirement Fund (CMR)
It is a public institution in Morocco that is mandated to manage the pension system. The
number of members and pensioners in Morocco has expanded making CMR a leader in the
Moroccan social welfare sector. Arbaoui (2013) noted that this institution needed much reforms.
The Moroccan Pension Fund has legal personality and financial anatomy. The following pension
plans are managed by the Fund as part of its social mission: (i) Civil pension plan. (ii) Military
pension plan (Auxiliary forces and Royal Armed Forces). (iii) ATTAKMILI pension plan. (iv)
Non-contributor schemes. In addition, CMR manages the following service operations on behalf
of 3rd parties: (i) Convectional withholding to benefit insurance companies, finance companies
and Association of Social Works (AOS) (Finances.gov.ma, 2013). (ii) Withholding pension tax
under health insurance statutory (AMO). (iii) Benefits for foundations: Hassan II foundation and
Mohammed VI foundation. (iv) Benefits to the Economy and Finance Ministry.
In order to prevent the collapse of this institution, the government announced a strategy
to negotiate with unions on the increment on retirement age. The CMR adopts the graded
distribution principle as a mode of operation for basic plans. The retirees’ pensions and their
successor pensions are funded by member’s contribution and contribution by employers.
ATTAKMILI supplemental plan operates in a capitalization mode. The basic plans give out
financial surpluses constituted by directly managed reserved funds; the Fund then places the
reserved funds in the financial market.
How the Moroccans Save for Retirement
The Moroccans save for their retirement through the CIMR which is a Moroccan Inter-
Professional Pension Fund (Moroccoworldnews.com, 2017). As at 2016, its company members
were 6276 and it had 615,934 active contributors and 164,435 beneficiaries. The CIMR had
announced a strategy of advancing the benefits at the end month instead of beginning of months

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in order to improve quality of its services. The Moroccan government has a requirement for the
private employers to reserve a certain proportion of their employees’ income as a retirement
saving. This enables the government to offer pension benefits to the retirees. In addition to the
mandatory saving requirement, the government allow financial institutions to take saving
deposits for voluntary saving by workers. Since these funds are fixed to be saved for an agreed
period of time, the financial institutions reinvest these funds at an interest. The Moroccan
government has a requirement for the reserve requirement on this institutions in order to
safeguard the public savings in case the institution becomes bankrupt.

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Bibliography
Achy, L. (2013). Morocco’s Pension Reform Entails Different Social Policies. Retrieved from
http://carnegie-mec.org/2013/02/05/morocco-s-pension-reform-entails-different-social-
policies-pub-51001.
Arbaoui, L. (2013). Morocco Plans to Reform State Pension System, Benkirane Says. Retrieved
from https://www.moroccoworldnews.com/2013/01/73783/morocco-plans-to-reform-
state-pension-system-benkirane-says/.
Bond, T. (2017). The 401(k) Has Failed as a Replacement for Pensions. Retrieved from
https://protectpensions.org/2017/01/04/401k-failed-replacement-pensions/.
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%20MINISTRY&m2=Departments.
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best-retirement.aspx.
International Monetary Fund. (2015). Morocco: First review under the arrangement under the
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executive director for the Republic of Slovenia. Washington, District of Columbia:
International Monetary Fund.
Lieber, R. (2018). How to Win at Retirement Savings. Retrieved from
https://www.nytimes.com/guides/business/saving-money-for-retirement.
Moroccoworldnews.com. (2017). Moroccan Retirement Pension Will Be Given at End of Month,
Instead of Beginning: CIMR. Retrieved from
https://www.moroccoworldnews.com/2017/10/230230/moroccan-retirement-pension-
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Shah, J., & Canaan, M. (2016). Overcoming behavioral biases to help individuals achieve
retirement security. Retrieved from
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behavioral-bias-in-retirement-security-planning.html.

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Smith, M. (2015). 10 Best Retirement Plan Options. Retrieved from
https://www.fool.com/investing/general/2015/11/18/10-best-retirement-plan-
options.aspx.
Ssa.gov. (2017). Social Security Programs throughout the World: Africa, 2017 - Morocco.
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