The government has announced a shift in its basic pension policy for senior citizens aged 65 and above, moving from a universal pension to a targeted, income-based model starting April 2025.

This change means that monthly pensions of MVR 5,000 will only be available to seniors with lower incomes, ending the current system where all seniors over 65 receive the benefit.

This policy adjustment responds to demographic shifts highlighted in the Ministry of Finance’s 2025 budget report. Projections show that the country’s fertility rate is expected to dip below the replacement level, while life expectancy is anticipated to rise. This combination will increase the dependency of an ageing population on a shrinking working-age base, leading to greater financial pressure on pension schemes.

The Ministry of Finance has noted that without reforms, the state would be on track to spend MVR 7.89 billion on pensions by 2055, equating to 2.8 percent of that year’s projected nominal GDP. Next year alone, MVR 1.45 billion will be allocated to senior citizen pensions, with an additional Rs 325 crore designated for retirees from public institutions.

To contain costs, the finance ministry will restrict pension benefits to lower-income seniors, though it has not yet specified income thresholds for eligibility. The government also plans to address issues of “double pensions” received by individuals eligible for both state and retirement pensions, proposing legislative changes to prevent overlap and ensure sustainable distribution.

The shift towards a targeted pension model aims to ensure resources are allocated to those in genuine financial need, preserving the system’s sustainability amidst evolving demographic pressures. Further details on eligibility criteria are expected as the government refines its approach in the coming months.