## Executive Summary

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### Urgency and core challenges
- Iraq’s pension system is "highly fragmented, inequitable, and inefficient."
- Key shortcomings:
  - Pension coverage gap in old age projected to rapidly widen, particularly for women outside the labor market and informally employed workers.
  - Under current policies, total fiscal cost of public, private, and budget-financed pensions expected to remain close to 4 percent of GDP annually for the next eight decades.
  - Fiscal spending on pensions disproportionately benefits relatively better-off formal workers in contributory schemes.
  - Uneven playing field between public and private sectors contributes to an outsized civil service and hampers private sector growth.

### Objectives and scope of the analysis
- Three main goals:
  - Assess existing public and private pension system on fiscal sustainability, labor market implications, coverage, and adequacy.
  - Propose core parametric reforms across public and private sector pension systems and options for institutional/administrative realignment.
  - Provide basis for stakeholder engagement to achieve a more inclusive system, including informal workers, female workers, workers with disabilities, and other disadvantaged groups.
- Reform proposals presented as one possible route; convergence on specific options should result from stakeholder dialogue.

### Overview of the current pension architecture (selected figures and features)
- National Pension System: Beneficiaries: 3.2 million
  - Contributory schemes: Beneficiaries: 665 thousand
    - Public sector workers (retiring after 2006): 625 thousand
    - Private sector workers: 40 thousand
  - Budget-financed programs: Beneficiaries: 2.5 million
    - Retiring before 2006 (legacy pensions): 1.96 million
    - Martyr’s foundation: 175 thousand
    - Victims of terrorism: 298 thousand
    - Political prisoners: 88 thousand
- Social Safety Net (SSN): Approximately 225,000 older persons live in households that benefit from cash transfers through the national SSN program.
- Institutional/parameter highlights:
  - Initial SPF contributions: employees 7 percent of earnings; government 12 percent of same base.
  - Unified Pension Law 2014: minimum pension nearly doubled to ID 400,000; contributions increased to 10 percent for employees and 15 percent for the state.
  - Mandatory retirement age set at 63; vesting period of 15 years of service.

### Labor market and demographic context (Box 1 key stats)
- Labor force participation rate: under 40 percent (LFS 2021).
- Female labor force participation rate: 11 percent (LFS 2021).
- Unemployment rate overall: almost 17 percent (LFS 2021).
- Female unemployment rate: 28 percent (LFS 2021).
- Public sector share of all jobs: 37 percent.
- Informal employment: 54 percent of total employment.
- Population under age 25: 56 percent (current).
- Share over age 65: 3 percent (current); 12 percent by 2070.

### Challenges of the existing pension
- Coverage gaps and gender exclusion:
  - Only about half (2.6 million) of private sector individuals are wage employees legally covered; active contributors ~500,000.
  - Effective coverage of contributory pensions in private sector: 9 percent of all working persons.
  - Public and private contributory pensions combined estimated to cover 70 percent of men and 45 percent of women above 65 years in 2023.
- Financial sustainability:
  - Structural imbalance between financing and benefit entitlements; SPF reserves projected to decline rapidly.
  - Legacy pension recipients increased from 1.7 million in 2010 to almost 2 million in 2021.
  - Overall legacy pension spending exceeded 10 trillion ID (3 percent of GDP).
  - Liabilities under martyrs/victims/political persecution schemes > 3 trillion ID in 2021 (1 percent of GDP).
  - Budget payments from these schemes expected to remain above 1 percent of GDP for the next 20 years, only unwinding in 60 years.
  - Under baseline: legacy and budget-financed pensions projected to cost 4.9 percent of GDP in 2024, declining to 1 percent of GDP in 30 years, then unwinding over following 30 years.
- Public sector contributory scheme specifics:
  - SPF reserve exceeded ID 12 trillion at end-2018 (4.5 percent of GDP).
  - Public sector payroll reached 19.8 percent of GDP in 2020.
  - Support ratio projected to fall from 4.44 in 2022 to 2.01 in 2030, and below 1 after 2060.
  - Average benefit ratio increased from 196 percent in 2013 to 253 percent in 2019.
  - SPF ran deficits reaching ID 1.6 trillion (0.5 percent of GDP) in 2021.
  - SPF reserves could be depleted by end of 2026; budgetary financing of 1 percent of GDP in 2026, rising to over 3 percent of GDP in following four decades under baseline.
- Private sector scheme specifics:
  - New private sector law delays reserve exhaustion beyond 2070, mainly via government contribution subsidies.
  - Without government funding, private sector reserves projected to be exhausted in 2051.
  - Long-run fiscal cost for private sector scheme expected to reach between 1 percent and 5 percent of GDP depending on coverage expansion.

### Sensitivity to civil service reform (Box 3)
- Baseline: percentage of new entrants to civil service decreases from 30 percent in 2022 to 15 percent by 2100.
- Support ratio and expenditures:
  - Government spending on pensions projected to increase to 6 percent of GDP and remain around 4 percent for 70-year projection horizon due to explicit and implicit liabilities.
- Accelerated civil service reform scenario:
  - Modeled attrition of government workforce to almost half current size by 2080.
  - SPF deficit peaks around 3 percent in 2040, then declines to below 1.5 percent by 2080s.
  - Trade-off: larger short- to medium-term SPF deficits, lower long-term liabilities after 2050.
- Long-term stable contribution rates necessary for sustainability (Table 1 figures preserved):
  - Public Sector: 88.6%
  - Private Sector: 35.9% (low coverage scenario)

### Proposed reform outcomes and fiscal impact (summary)
- Reform aims:
  - Reduce overall fiscal costs; reallocate funds to vulnerable; align replacement ratios across sectors and cohorts; expand private sector coverage; strengthen lifetime contribution incentives; institute regular indexation.
  - Optional Pillar 0 to cover those without income in old age.
- Projected impacts under proposed reforms:
  - Expected reduction in fiscal cost to around 0.7 percent of GDP by 2075.
  - Thereafter projected costs between 0.1 and 1 percent of GDP by 2100.
  - If a Pillar 0 pension is introduced, long-term cost would reach between 0.8 and 1.8 percent of GDP.
- Budgetary support under parametric reforms:
  - Applying parametric reforms to all public employees would contain required budgetary support at between 1 and 1.5 percent of GDP annually for the next two decades; stabilizes at about 1 percent of GDP in the long term.
  - Partial integration peak: 3.2 percent of GDP in 2040 if reforms only for new entrants; peak over 2 percent of GDP in next decade if applied to existing future service and new entrants, then decline to near zero.
  - Harmonization long-run support: about 0.6 percent of GDP (if applied to all members) or about 1 percent (if only new members).
  - Cumulative budget support projected to peak at 4 percent of GDP in 2027 (5 percent under baseline), thereafter declining and stabilizing at 1 percent of GDP annually in long run (4 percent under baseline).
  - Private sector reserves exhaustion: harmonization 2092; partial integration 2096.
  - Targeted contribution subsidies can reduce fiscal cost to less than 0.1 percent of GDP throughout.

### Proposed parametric reform measures (exact parameters preserved)
- Strengthening fiscal sustainability:
  - Eliminate the regressive livelihood and education allowances in the public sector.
  - Reduce accrual rate from 2.5% to 2%.
  - Rationalize survivor benefits.
  - Strengthen verification and consider transitional indexation rules for legacy pensions.
- Fairness and labor market incentives:
  - Gradually extend pension base to career average.
  - Anchor minimum pension entitlement to years of contribution.
  - Increase retirement age to 65 for new entrants, with subsequent increases linked to life expectancy.
  - Apply actuarially fair factors for early retirement from age 60.
- Adequacy and predictability (public sector):
  - Automatic cost-of-living adjustments based on CPI.
  - Link minimum pension to minimum wage and maintain a floor (example: set at 60 percent of minimum wage).
  - Introduce contribution ceiling (five times the average wage) and maximum benefits cap (including replacement rate at 80 percent).
- Targeting contribution subsidies (private sector):
  - No government contribution subsidy for formal workers.
  - Target subsidy to self-employed and informal workers; tapered as declared wages increase.
- Selected exact parametric table items:
  - Retirement Age (current): Public sector 60; Private sector 63 M, 58 F. Reform: increase to 65 for new entrants.
  - Incremental Replacement Rate: Current 2.50%; Reform 2%.
  - Contribution Rates (current): public sector 25%; private sector 13% (non-oil); 20% (oil). Reform: public sector 25%; private sector 14% (non-oil); 19.1% (oil).
  - Minimum Pension (current): public sector ID 500,000; private sector 100% of monthly minimum wage. Reform: 50% of minimum wage with 15 years contribution, increasing to 80% with 30 years.
  - Survivor Benefits (current): 80% for 1 eligible survivor; 90% for 2; 100% for 3+. Reform: Category A: 60% for one survivor, 70% for two, 80% for three or more; Category B: 10% to each up to 20% maximum.
  - Contribution subsidy (current private sector): flat 8% of wages for formal workers and 15% for self-employed/informal. Reform: no subsidy for formal; targeted 9% of wages for self-employed/informal earning minimum wage.

### Institutional reform options (exact characterizations)
- Option A: Partial Integration (One Scheme, Unified Administration for new entrants)
  - Risks: larger fiscal deficit in medium term, larger burden on general budget, break in inter-generational solidarity, complexity for mixed-career workers.
  - Advantages: administrative efficiencies, economies of scale, gradual evolution, single administration for mixed careers.
- Option B: Harmonization (One Scheme, Separate Administrations)
  - Risks: divergence in entitlements over time unless unitary legislative framework; reduced risk pooling.
  - Advantages: unitary regulation can prevent divergence; administratively less disruptive.

### Closing the coverage gap — strategies and Pillar 0 design
- Two complementary strategies:
  - Expand contributory coverage to unregistered private sector workers.
  - Establish a noncontributory (Pillar 0) pension to address remaining gap.
- New law features and measures to expand coverage:
  - Gradual extension of mandatory coverage, flexible contribution arrangements, progressive employer obligations, awareness campaigns, enforcement capacity strengthening, short-term risk protection, tailored contributory schemes for informal workers, voluntary savings options.
  - Specific measures for women: flexible participation (part-time, home-based), non-gendered pension credits for maternity/caring, transferability of maternity benefits to spouse, childcare support.
- Projected private sector coverage scenarios (Table 6 figures preserved; percent):
  - Salaried workers: Present 18.1; Medium 30.0; High 70.0
  - Self-employed: Present 0.0; Medium 11.5; High 38.0
  - Family workers: Present 0.0; Medium 0.0; High 32.0
  - Employers: Present 0.0; Medium 0.0; High 40.0
  - Total: Present 9.3; Medium 19.4; High 54.2
  - Note: high-coverage rates assumed to be attained after 50 years and maintained.
- Pillar 0 illustrative design:
  - Benefit amount used in simulations: 40 percent of the minimum wage (140,000 ID initially), adjusted with CPI.
- Immediate fiscal cost estimates for Pillar 0 (benefit = 40 percent of minimum wage):
  - Universal approach: 0.71 percent of GDP (2024, Low SS Coverage) and immediate headline examples show 1.17 percent of GDP in 2075; offsetting fiscal savings of −0.26 percent of GDP from lower accrual rate could leave net cost at 0.91 percent of GDP in example.
  - Pension-tested approach: 0.58 percent of GDP (2024); long-term upper bound 0.86 percent of GDP.
  - Pension- and affluence-tested approach: 0.44 percent of GDP (2024); long-term upper bound 0.65 percent of GDP.
  - Gradual implementation (eligibility starting at age 70 and aligning to NRA) can reduce short-term fiscal impact by approximately 40 percent for all scenarios.

### Key scenarios and numerical outcomes (selected)
- Replacement ratios: reduced but remain above ILO Convention 102 minimum standards.
- Budgetary support (public pensions):
  - Between 1 and 1.5 percent of GDP annually for next two decades if reforms applied to all employees.
  - Stabilizes at about 1 percent of GDP long term under parametric reforms for all.
  - Partial integration peak: 3.2 percent of GDP in 2040 (if reforms only for new entrants).
  - Harmonization long-run: about 0.6 percent of GDP (if applied to all members) or about 1 percent (if only new members).
- Private sector reserves exhaustion:
  - Harmonization: 2092; Partial integration: 2096.
- Cumulative budget support:
  - Peak at 4 percent of GDP in 2027 (5 percent under baseline), thereafter declining and stabilizing at 1 percent of GDP annually in the long run.
- Long-run projections:
  - Implementing proposed parametric reforms under either harmonization or partial integration expected to reduce fiscal cost to around 0.7 percent of GDP by 2075; thereafter reach between 0.1 and 1 percent of GDP by 2100.
  - Long-term cost with Pillar 0 also introduced: between 0.8 and 1.8 percent of GDP.

### Policy recommendations and implementation guidance (preserved measures)
- Core reform approach:
  - Apply parametric reforms consistently across public and private sector pensions.
  - Focus on eligibility and benefit rules to achieve equity, adequacy, and sustainability rather than relying on large contribution rate increases.
- Pillar 0 choices:
  - Consider universal, pension-tested, or pension- and affluence-tested designs with benefit at 40 percent of minimum wage; adopt gradual sequencing to reduce short-term fiscal impact.
- Sequencing and political economy:
  - Gradual, multistage, multi-year implementation with broad consultative engagement.
  - Package sensitive measures with compensatory/popular measures and clear public communication.
- Complementary measures:
  - Non-gendered pension credits for family care, transferability of maternity benefits, financial access to childcare to incentivize female formal participation.
  - Strengthen social insurance for short-term risks (unemployment, maternity, employment injury, sickness).
- Further analysis:
  - Conduct full welfare-impact modeling using most recent survey data to fine-tune policy choices.

*IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq — Executive Summary*

### Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

### Executive Summary

### Urgency and core challenges
- Iraq’s current pension system is described as "highly fragmented, inequitable, and inefficient."
- Key shortcomings:
  - The pension coverage gap in old age is projected to rapidly widen, particularly for women outside the labor market and informally employed workers.
  - Under current policies, the total fiscal cost of public, private, and budget-financed pensions is expected to remain close to 4 percent of GDP annually for the next eight decades.
  - Fiscal spending on pensions disproportionately benefits relatively better-off formal workers participating in contributory schemes.
  - The system creates an uneven playing field between public and private sectors, contributing to the expansion of an already-outsized civil service and hampering economic diversification and private sector growth.

### Objectives and scope of the analysis
- Three main goals of the paper:
  - Assess the existing public and private pension system on fiscal sustainability, labor market implications, coverage, and adequacy of benefits.
  - Propose a core set of parametric reforms across public and private sector pension systems, and options for institutional and administrative realignment.
  - Provide a basis for stakeholder engagement to achieve a more inclusive system, including workers in the informal economy, female workers, workers with disabilities, and other disadvantaged groups.
- The reform proposals are presented as one possible route; convergence on specific options and parameters should result from further stakeholder dialogue.

### Overview of the current pension architecture (selected figures and features)
- National Pension System: Beneficiaries: 3.2 million
  - Contributory schemes: Beneficiaries: 665 thousand
    - Public sector workers (retiring after 2006): 625 thousand
    - Private sector workers: 40 thousand
  - Budget-financed programs: Beneficiaries: 2.5 million
    - Retiring before 2006 (legacy pensions): 1.96 million
    - Martyr’s foundation: 175 thousand
    - Victims of terrorism: 298 thousand
    - Political prisoners: 88 thousand
- Social Safety Net (SSN): Approximately 225,000 older persons live in households that benefit from cash transfers through the national SSN program.
- Institutional and parameter highlights:
  - Contribution arrangement (initial SPF setup): contributions to the SPF were set at 7 percent of employees’ earnings, with the government contributing 12 percent of the same base.
  - Subsequent parametric changes (Unified Pension Law 2014): minimum pension nearly doubled to ID 400,000; pensions for retirees’ survivors without private income/position were introduced; pension contributions were increased to 10 percent for employees and 15 percent for the state.
  - Mandatory retirement age set at 63; vesting period of 15 years of service.

### Proposed reform outcomes and fiscal impact
- Proposed reforms aim to:
  - Substantially reduce the overall fiscal costs of the pension system.
  - Reallocate public funds to extend pension protection to the most vulnerable.
  - Align replacement ratios between public and private sectors and across future cohorts.
  - Expand private sector worker coverage, strengthen incentives for lifetime contribution, foster formalization and labor participation, and institute regular pension indexation to maintain benefit adequacy.
  - Optionally introduce a Pillar 0 pension to cover those without income in old age.
- Projected fiscal impacts (under proposed parametric reforms and institutional options):
  - Expected reduction in fiscal cost to around 0.7 percent of GDP by 2075.
  - Thereafter, projected costs reach between 0.1 and 1 percent of GDP by 2100.
  - If a Pillar 0 pension is introduced, long-term cost would reach between 0.8 and 1.8 percent of GDP.

### Reform design principles and implementation approach
- Reform should be gradual, multistage, and multi-year due to political economy, capacity, and other constraints.
- Key implementation elements:
  - Appropriate sequencing of reforms to ease political economy and capacity constraints.
  - A broadly consultative process to build consensus, including representation of the currently uncovered.
  - Good public communication about chosen reforms, recognizing the complexity of pension reform politics.

### Institutional context and legal milestones
- Post-2003 trajectory:
  - Pension system for public sector employees replaced with emergency flat payments financed by the government budget after 2003; progressively restored with changes in 2006, 2009, 2014, and 2019–20.
  - The first post-2003 pension law adopted January 2006; the Unified Pension Law of 2007 split the public sector pension into legacy pensions (retirements before January 17, 2006) and a new contributory pay-as-you-go defined benefit scheme for retirees after January 17, 2006.
  - The Unified Pension Law (Law 9/2014), adopted February 2014, updated pension parameters and left institutional and financing arrangements largely unchanged.

*IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq — Executive Summary*

### Box 1: Labor Market and Demographic Context

### Box 1: Labor Market and Demographic Context

### Labor market characteristics
- Overall labor force participation rate: under 40 percent (LFS 2021).
- Female labor force participation rate: 11 percent (LFS 2021).
- Unemployment rate overall: almost 17 percent (LFS 2021).
- Female unemployment rate: 28 percent (LFS 2021).
- Public sector share of all jobs: 37 percent.
- Employment in the informal economy: 54 percent of total employment.
- Contributing factors cited:
  - Dominant role of the state in the economy.
  - High public sector wage premium.
  - Generous pension benefits.
- Consequence: These factors explain distortions in the labor market and weak private sector job creation.

### Demographic trends and projections
- Share of population under age 25: 56 percent (current).
- Share of people over age 65:
  - Current: 3 percent.
  - Projected by 2070: 12 percent (i.e., could quadruple).
- Population growth: described as gradually slowing.

### Implications for pensions and social protection
- Combined labor market and demographic trends imply increasing numbers of workers in the informal sector, women, and the structurally unemployed could be exposed to income uncertainty in old age.
- Without significant reforms, the pension system and other parts of the social protection system may become unsustainable.

### Key statistics (as presented)
- Labor force participation rate: under 40 percent.
- Female labor force participation rate: 11 percent.
- Unemployment: almost 17 percent overall; 28 percent for women.
- Public sector employment share: 37 percent.
- Informal employment share: 54 percent of total employment.
- Population under age 25: 56 percent.
- Share over age 65: 3 percent (current); 12 percent by 2070.

*Source: IMF Iraq Article IV (2022), ILO Demographic Projections, LFS 2021*

### 3.   Challenges of the Existing Pension

### 3.   Challenges of the Existing Pension

### Coverage Gaps
- Low effective coverage characterizes the private sector scheme.
- Based on recent amendments, it is estimated that only about half (2.6 million) of individuals employed in the private sector are wage employees and legally covered on a mandatory basis.
- The rest are now eligible on a voluntary basis, including:
  - 1.9 million self-employed workers,
  - 405,000 family workers,
  - 383,000 employers.
- The current number of active contributors of approximately 500,000 workers brings effective coverage of contributory pensions in the private sector to 9 percent of all working persons.
- Covered workers in the private sector are comprised mainly of men, reflecting the gender gap in labor force participation and the high share of employed women working in the public sector.
- Among legally covered workers, low uptake is explained by:
  - lack of awareness of rights and obligations (among both workers and employers),
  - complicated administrative procedures required for registration,
  - mistrust of government institutions,
  - potential unaffordability of contributions (ILO 2021a).
- Government capacity to enforce compliance is constrained due to the low number of labor inspectors employed by the Ministry of Labor and Social Affairs.
- Public and private contributory pensions combined are estimated to cover 70 percent of men and 45 percent of women above 65 years of age in 2023.
- Low rates of female labor force participation and high informality among working women are major factors of gender exclusion from contributory schemes.
- The demographic transition, leading to a significant increase in older persons, will further rapidly erode pension coverage rates from contributory schemes among the older population, especially women.

### Financial Sustainability — Overview
- The pension system faces a structural imbalance between sources of financing and benefit entitlements.
- Additional fiscal pressures arise from:
  - budget-financed pensions in the short run,
  - the new government contribution to private sector pensions in the medium to long run.
- Structural imbalance is expected to lead to rapidly declining reserves of the SPF, given higher benefit ratios of public sector pensions, including for survivors.
- Reserves of the private sector scheme are also expected to have a downward trajectory driven by demographic changes.
- Large budget-financed spending on legacy pensions, other budget-financed pensions, and newly introduced budget contributions to private sector pensions will draw significant fiscal resources for decades.
- Concerns are raised about achieving intergenerational equity without:
  - relying on additional fiscal contributions to pensions in the future (impacting macroeconomic stability), or
  - increasing contributions from workers and employers to economically unaffordable levels.

### Budget-Financed Pensions: Recent Trends and Projections
- Legacy pension recipients increased from 1.7 million in 2010 to almost 2 million in 2021.
- Overall legacy pension spending exceeded 10 trillion ID (3 percent of GDP).
- Martyrs’ fund primary beneficiaries rose from 139,469 in 2013 to 176,884 in 2021.
- Beneficiaries categorized as victims of terrorism more than doubled since 2016, reaching an estimated 298,460 in 2021.
- Beneficiaries deemed victims of political persecution increased ninefold to 100,000 between 2011 and 2021.
- Liabilities under the three budget-financed schemes (martyrs, victims of terrorism, political persecution) amounted to more than 3 trillion ID in 2021 (1 percent of GDP).
- Total pension claims from budget-financed schemes have continued to trend upward; actual payment amounts varied over time, leading at times to a buildup of arrears.
- Fiscal costs of budget-financed pension schemes are expected to remain elevated due to extensive survivor benefits, which appear generous in international comparison, leading to a slow decay of the stock of pension liabilities.
- Budget payments from these schemes are expected to remain above 1 percent of GDP for the next 20 years, only completely unwinding in 60 years.
- Under the baseline:
  - legacy and budget-financed pensions are projected to cost 4.9 percent of GDP in 2024,
  - gradually declining to 1 percent of GDP in 30 years,
  - completely unwinding over the following 30 years.
- A potential worsening of the security situation could lead to a surge in the number of claimants under martyrs and victims of terrorism schemes.

### Public Sector Contributory Scheme Challenges
- The 2019–20 amendments to the public sector pension law expanded eligibility, lowered the retirement age, reduced aggregate contributions, and increased pension benefits—eroding financial sustainability.
- SPF reserve exceeded ID 12 trillion at the end of 2018 (4.5 percent of GDP).
- Public sector payroll grew rapidly to reach 19.8 percent of GDP in 2020 (almost half of all current spending), covering over 35 percent of the labor force.
- The support ratio (contributors to pensioners) is projected to fall from 4.44 in 2022 to 2.01 in 2030, and fall below 1 after 2060.
- The public sector system features larger payouts and shorter service duration requirements relative to international comparators:
  - Average benefit ratio increased from 196 percent in 2013 to 253 percent in 2019.
  - Retirement age is 60 years.
  - High individual replacement rates due to use of last three-year average salary for pension calculations, a high accrual rate, and numerous allowances.
- Pension income can often be higher than pre-retirement income for public sector workers.
- Baseline projections under current policies indicate:
  - average public sector replacement ratio for the bottom third of monthly earnings will peak at 170 percent in 2033 and remain above 150 percent for another three decades,
  - for the top third it will remain above 100 percent for the next 25 years.
- Expenditures (payments to beneficiaries) are now higher than revenues from contributors, with the gap widening since 2019.
- SPF ran deficits reaching ID 1.6 trillion (0.5 percent of GDP) in 2021.
- Baseline projections indicate SPF reserves could be depleted by the end of 2026, requiring budgetary financing of 1 percent of GDP in 2026, rising to over 3 percent of GDP in the following four decades.
- Iraq has higher spending than other countries with similar shares of old-age populations, driven by generosity of public sector scheme, high numbers of survivors, and early retirement.

### Private Sector Contributory Scheme Challenges
- The private sector contributory scheme is significantly less generous than the public sector scheme but features large payouts for some groups driven by:
  - pension formula,
  - entitlements to early retirement.
- The new private sector pension law is projected to delay exhaustion of reserves beyond 2070.
- The projected improvement is mostly caused by an increase in revenues through government funding in the form of universal contribution subsidies for all private sector workers, rather than structural benefit reforms.
- Except for an increase in the normal retirement age, the new law does not address main cost and inequity drivers:
  - generous early retirement options,
  - benefit formula based on last five years average wage and a relatively high accrual rate,
  - extensive definition of eligible survivors.
- Without the new source of government funding, the private sector pension system would face significant financial sustainability challenges in the medium term, with a projected reserve exhaustion point in 2051.
- The government’s direct commitment to contribution subsidies and the implicit liability as guarantor after projected depletion of reserves will result in the private sector scheme requiring a gradually rising budgetary support.
- Under different assumptions on coverage expansion, the long-run fiscal cost for the private sector scheme is expected to reach between 1 percent and 5 percent of GDP.

*IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq*

### Box 3: Sensitivity of Baseline Projections to Civil Service Reform

### Box 3: Sensitivity of Baseline Projections to Civil Service Reform

### Key findings on fiscal dynamics and payroll assumptions
- Baseline assumption: the percentage of new labor force entrants to the civil service each year decreases from 30 percent in 2022 to 15 percent by 2100.
- Despite the declining share of new entrants, overall payroll is expected to continue to grow due to robust overall population growth.
- Under the baseline, the SPF deficit is expected to widen to over 3 percent of GDP in the long run.
- Replacement ratios:
  - For retirees in the top third of the salary range: increase from about 60 percent in 2022 to over 80 percent in 2045.
  - For retirees in the lowest third of the salary scale: stable at 100 percent (minimum pension is equal to 100 percent of the minimum wage).
- Owing to explicit and implicit government liabilities on legacy pensions and the public and private schemes, government spending on pensions is projected to increase to 6 percent of GDP and remain at around 4 percent of GDP for the projection period (70 years).

### Accelerated civil service reform scenario (labor attrition to private sector)
- Scenario description: accelerated wage bill reform and potential transition of public sector workers into the private sector—modeled as an attrition of the government workforce to almost half its current size by 2080.
- Projected impacts:
  - The SPF deficit is projected to widen and reach its peak at around 3 percent in the 2040s.
  - After the peak, the deficit is projected to steadily decline to below 1.5 percent by the 2080s.
- Timing effects:
  - Accelerated reforms result in fewer employees (contributors) early in the time horizon, producing larger SPF deficits relative to the baseline in the short to medium term.
  - Fewer public employees reduce the future stock of pension liabilities (fewer retirees), lowering the burden on the SPF and producing lower deficits after 2050 relative to the baseline.

### Sensitivity to coverage and fiscal support
- The magnitude of required fiscal support critically depends on system coverage: greater worker participation implies larger government subsidies.
- Three coverage scenarios are projected (low, medium, high) and affect reserves and total budgetary support over time.
- Tabled and charted indicators in the source highlight:
  - Evolution of reserves under different laws and coverage scenarios.
  - Required cumulative budgetary support under baseline and reform scenarios (in percent of GDP).

### Relevant numeric parameters and tabled values
- Current contribution rates (Table 1):
  - Public Sector: 25.0%
  - Private Sector (2023 Law): 13.0% (non-oil); 20.0% (oil)
- Long-term stable contribution rates necessary to achieve long-term financial sustainability without additional fiscal expenditure (Table 1):
  - Public Sector: 88.6%
  - Private Sector: 35.9% (low coverage scenario)
- Projection timeframes and milestones cited:
  - 2022, 2045, 2040s, 2050, 2080, 2080s, 2100
- Projection horizon described as 70 years for overall pension spending profile.

### Policy implications and reform considerations
- Calibration of pension reform must account for the future path of government payroll, including the pace of civil service hiring and attrition.
- Accelerated civil service reform presents trade-offs:
  - Short- to medium-term deterioration in SPF balances due to fewer contributors.
  - Longer-term fiscal relief from a smaller stock of future pension liabilities and lower deficits after 2050.
- Coverage expansion choices materially affect fiscal costs; design must weigh adequacy objectives against fiscal sustainability.
- Reform design should:
  - Ring-fence unfunded legacy liabilities as government liabilities rather than allowing them to burden future contributors.
  - Preserve acquired rights for currently insured members while prioritizing adjustments for new entrants to enhance political feasibility.
  - Consider harmonization of key pension parameters across schemes to reduce labor market distortions and administrative fragmentation.

*Source: Authors’ simulations based on ILO actuarial and World Bank PROST models, as presented in Box 3 of the analytical note.*

### 5.   Proposed Reform Plan for the National

### 5.   Proposed Reform Plan for the National Contributory Pension System

### Overarching objective and sequencing
- Overarching goal: bring all schemes under an equitable, sustainable, and adequate set of parameters, with similar rules and benefits across beneficiaries.
- Implementation approach:
  - (1) parametric reforms and (2) reorganization of different funds.
  - With sufficient political support, parametric and institutional reforms can be implemented simultaneously; otherwise pursue a gradual, sequential path with parametric reforms applied first.
- Rationale for urgency: stem deficits of the SPF before they become more difficult to finance and significantly reduce the fiscal burden; delay will increase fiscal costs of the SPF and require a greater level of tightening in the future.

### Proposed package of parametric reforms — objectives
- Motives: enhance inter- and intra-generational equity; reduce distortions in the labor market; make the national pension system viable; stem SPF deficits; improve adequacy of benefits and coverage; prevent accumulation of private-sector deficits; target contribution subsidies to most vulnerable workers; align pension parameters across sectors.
- Four clusters of reforms:
  - Strengthen long-term fiscal sustainability and intergenerational equity.
  - Enhance fairness within and across generations, and reduce labor market distortions.
  - Improve adequacy and predictability of public sector pension entitlements.
  - Improve efficiency of government contribution subsidies to target vulnerable private-sector workers.

### Key parametric reform measures (preserved exact parameters)
- Strengthening fiscal sustainability:
  - Eliminate the regressive livelihood and education allowances in the public sector.
  - Reduce accrual rate from 2.5% to 2%.
  - Rationalize survivor benefits while keeping in line with international standards.
  - Strengthen verification processes and consider transitional rules for indexation of legacy pensions in payment.
- Fairness and labor market incentives:
  - Gradually extend the base used for pension calculations to reflect contributions across the entire career.
  - Anchor the minimum pension entitlement to the number of years of contribution.
  - Increase retirement age to 65 for new entrants, with subsequent increases linked to life expectancy.
  - Apply actuarially fair factors for pension reductions in case of early retirement.
- Adequacy and predictability (public sector):
  - Automatic cost-of-living adjustments based on consumer price index (CPI).
  - Link minimum pension in the public sector to the minimum wage and maintain a floor (example: set at 60 percent of the minimum wage).
  - Introduce a maximum contributions ceiling (five times the average wage) and a maximum benefits cap (including replacement rate at 80 percent).
- Targeting contribution subsidies (private sector):
  - No government contribution subsidy for formal workers.
  - Target subsidy to self-employed and informal workers; tapered as declared wages increase.

### Transitional and coverage principles
- Parametric reforms apply to new entrants and only partially to future service of currently insured members.
- Guarantees for currently insured members:
  - Retirement age for current members assumed to remain the same as in the old laws.
  - Accrual rate reduced to 2% only for future service.
  - Minimum pension in the public sector assumed frozen at ID 500,000 until caught up by the new minimum pension level.
  - Reference earnings for pension calculation remain based on the final three years of salary for years before the reform, and average salary for years after the reform.

### Table of proposed parametric changes (selected exact items)
- Retirement Age:
  - Current laws: Public sector: 60. Private sector: 63 M, 58 F.
  - Reforms: Increase to 65—for new entrants—and eventually link to life expectancy.
- Rules for Early Retirement:
  - Current laws: public sector: disabled and women taking care of children can retire early without penalty; private sector: Age 60/55 with 20 years of service; age 50 with 30/25 years of service; 15 years of service for selected categories. No penalty is applied in any of the cases.
  - Reforms: Apply actuarially fair factors for pension reduction in case of early retirement from age 60.
- Rules for Delayed Retirement:
  - Current laws: public sector: mandatory retirement at 60 (with some exceptions); private sector: no rules.
  - Reforms: Normal retirement at age 65—eventually linked to life expectancy.
- Post-retirement Indexation:
  - Current laws: public sector: not specified in law (ad hoc); private sector: annual adjustment based on inflation.
  - Reforms: Automatic indexation to inflation, with the inclusion of a cap on the inflation adjustment.
- Incremental Replacement Rate (Accrual Rate):
  - Current: 2.50%
  - Reform: 2%
- Maximum Pension:
  - Current laws: public sector: none; private sector: 80% of the reference salary.
  - Reform: 80% of the reference salary.
- Reference Earnings for Pension Calculation:
  - Current laws: public sector: last three years; private sector: last five years. Contribution ceiling set at five times the monthly minimum wage.
  - Reform: Entire revalorized career average earnings (gradual transition). Contribution cap set at five times the average wage.
- Minimum Pension:
  - Current laws: public sector: ID 500,000; private sector: 100% of the monthly minimum wage.
  - Reform: 50% of minimum wage with 15 years of contribution, increasing to 80% of monthly minimum wage with 30 years of contribution.
- Livelihood Allowance:
  - Current laws: public sector: 1% of the pension per year of service; private sector: none.
  - Reform: None.
- Degree (Education-Related) Allowance:
  - Current laws: public sector: additional percentage of pension according to graduate level; private sector: none.
  - Reform: None.
- Survivor Benefits:
  - Current laws: 80% for 1 eligible survivor; 90% for 2 eligible survivors; 100% for 3 or more survivors.
  - Reform: Spouse and children (Category A): 60% for one survivor, 70% for two, 80% for three or more. If no Category A dependents, then 10% goes to each Category B survivor (siblings, parents, etc.) up to a maximum of 20%.
- Contribution Subsidies:
  - Current laws: private sector: flat subsidy of 8% of wages for formal workers and 15% of wages for self-employed and informal workers.
  - Reform: private sector: no subsidy for formal workers; targeted contribution subsidy of 9% of wages for self-employed and informal workers earning at the minimum wage.
- Contribution Rates:
  - Current laws: public sector: 25%; private sector: 13% (non-oil); 20% (oil).
  - Reform: public sector: 25%; private sector: 14% (non-oil); 19.1% (oil).
- Other short-term benefits:
  - Current private sector: unemployment, maternity, sickness, and employment injury.
  - Possible expansion: transferability of maternity benefits to spouse and financial access to health care.

### Coupling parametric reforms with institutional reforms
- Need: parametric changes alone may not prevent divergence over time; reduce institutional fragmentation through either:
  - Option A: Partial Integration (One Scheme, Unified Administration for new entrants)
    - Private sector workers and new entrants in the public sector placed in a common fund under unified administration; current public sector employees stay in SPF as a closed group until phased out.
  - Option B: Harmonization (One Scheme, Separate Administrations)
    - Separate funds maintained for public and private sectors, with unitary regulation to prevent divergence; common set of parameters applies to all participants.
- Both options apply common parameters and partial application to currently insured workers; harmonization can be a first step toward partial integration.

### Comparative risks and advantages of institutional options (exact characterizations)
- Option A: Partial Integration
  - Risks:
    - Closing SPF to new members implies larger fiscal deficit in the medium term, due to reduced flow of contributions.
    - Larger burden on the general budget.
    - Break in inter-generational solidarity.
    - More structural and disruptive institutional adjustments may encounter resistance.
    - Can become complex to accommodate workers with mixed private–public sector careers.
  - Advantages:
    - Improved administrative efficiencies, streamlined administration, economies of scale in investment and management.
    - Can represent a more gradual evolution from current status quo.
    - Single administration for workers with mixed private–public sector careers.
- Option B: Harmonization
  - Risks:
    - Risk of divergence in scheme entitlements between private and public sectors over time, unless binding unitary legislative framework.
    - Reduced risk pooling and more limited solidarity in financing between public and private sector workers in the long run.
    - More structural and disruptive institutional adjustments may encounter resistance.
    - Can become complex to accommodate workers with mixed private–public sector careers.
  - Advantages:
    - Unitary regulation can prevent divergence in parameters; can be administratively less disruptive relative to full integration.

### International/regional precedents (selected cases from MENA)
- Jordan: Reforms in 1995 and 2003 put currently employed civil servants and military personnel in a closed group, with all new hires covered by the same scheme as private sector workers.
- Egypt: New law in 2020 aimed at consolidating the administration of two separate funds (public and private) into a single fund, together with harmonization of eligibility and benefit parameters.
- Bahrain: Separate pension funds for public and private sector workers have been merged; a royal decree to unify parameters and benefits is yet to be implemented.
- Saudi Arabia: Reforms in 2021 started merging two social insurance entities to ensure public and private sector employees are covered by one insurance scheme; aims include better administration, digitalization, governance, coordination, and investment/risk management.
- Oman: Reforms adopted in July 2023 integrate 11 public and private sector pension funds into one single national scheme and establish a universal government-financed social pension for all citizens. The new unified national pension scheme will adopt a common set of parameters (including a revision of normal and early retirement rate, full career average formula, conditional indexation of pension benefits, and a revised accrual rate). The contributory pension system is projected to be sustainable at current contribution rates for a period of 100 years. After past accrued liabilities are settled, the government will contribute to the pension system only through the universal old age and disability Pillar 0 pensions.

*Source: anea2024001 - 5.   Proposed Reform Plan for the National Contributory Pension System*

### 6.   Assessing the Impact of the

### 6.   Assessing the Impact of the Proposed Reforms

### Impact on Adequacy and Equity
- The proposed parametric reforms will lower replacement ratios in retirement but they "would remain well above the ILO’s Convention 102 minimum standards."
- The reforms will improve equity:
  - Reduce gaps between public and private sector benefits and across generations.
  - Private sector replacement ratios would gradually become more aligned across the income distribution and slightly exceed public sector ratios in about two decades, reflecting faster private sector wage growth.
  - Closer alignment ensures workers in similar cohorts receive similar retirement benefits across sectors.
  - Adoption of a career-average approach will strengthen the correspondence between contributions over working life and benefits at retirement.
- Definition notes from the source:
  - Replacement ratio defined as "the average pension of new pensioners in a year, divided by the average earnings of all current contributors in the same year."
  - Longer-term lower replacement ratios for low-wage earners reflect this definition and a higher average age at entry into the public scheme, leading to lower accumulated service at retirement and lower average pensions as a percentage of salary.

### Impact on Financial and Fiscal Sustainability
- Near-term and medium-to-long-term effects on the public sector’s SPF (public pension fund):
  - Parametric reforms can slow the decline in SPF reserves in the near term and reduce the burden on the government budget in the medium to long term.
  - Gradual implementation (applied to new recruits only or to new entrants plus future service of current employees) delays near-term exhaustion of SPF reserves only by "a year or two"; main gains accrue in the medium to long term.
- Budgetary support under parametric reforms:
  - Applying parametric reforms to all public sector employees would "contain the required budgetary support at between 1 and 1.5 percent of GDP annually for the next two decades."
  - In the long term, required budgetary support "stabilizes at about 1 percent of GDP."
  - A positive long-term fiscal cost remains because of the assumption that current very low contributory salaries in the public sector will keep the same relationship with the minimum pension.
- Effects of institutional reform options combined with parametric reforms:
  - Partial integration (parametric reforms applied only to new entrants into civil service):
    - May require higher budgetary support in the initial two decades because currently insured members remain in a closed group.
    - Required budgetary support projected to peak at "3.2 percent of GDP in 2040."
    - Once the closed SPF group phases out (in less than four decades), budgetary support begins to fall, reaching very low levels close to "0 percent of GDP by 2080" without any increase in contribution rate.
    - If parametric reforms applied to both existing employees’ future service and new entrants, required budgetary support would "peak at over 2 percent of GDP in the next decade," then monotonically decline to near zero.
  - Harmonization:
    - Requires less budgetary support in initial decades compared to partial integration because SPF remains open and contributions from new public employees continue.
    - Continued separation of public and private schemes implies more limited risk pooling and additional financing needed for long-term sustainability.
    - Budgetary support expected to remain "at about 0.6 percent of GDP in the long run if the parametric reforms are applied to all members" and "at about 1 percent if applied only to new members."
- Private sector reserves and subsidies:
  - Private sector reserve path preserved under reform options until the 2090s.
  - Under harmonization, private sector reserves expected to be exhausted in "2092," after which a small budgetary financing of "less than 0.5 percent of GDP" will be required.
  - With partial integration of the private sector and new public members, reserves preserved to "2096."
  - A more targeted approach for contribution subsidies (focusing on vulnerable categories) reduces the fiscal cost of subsidies to "less than 0.1 percent of GDP" throughout the period.
- Overall fiscal trajectory under proposed reforms:
  - Implementation of parametric reforms for all members along with harmonization of pension fund administration will reduce cumulative required budget support relative to the current trajectory.
  - Under these reform options, cumulative budget support will "peak at 4 percent of GDP in 2027 (5 percent under the baseline)," thereafter declining and stabilizing "at 1 percent of GDP annually in the long run (4 percent under the baseline)."
  - Note: budgetary support thereafter is expected to be "about 1.3 percent of GDP in the very long run," covering both private sector and newly insured public sector workers after the reforms.

### Key Scenarios and Numerical Outcomes
- Replacement ratios: reduced by reforms but remain above ILO Convention 102 minimum standards.
- Budgetary support (public pensions):
  - Contained at "between 1 and 1.5 percent of GDP annually" for next two decades if reforms applied to all employees.
  - Stabilizes at "about 1 percent of GDP" in the long term under parametric reforms applied to all.
  - Partial integration peak: "3.2 percent of GDP in 2040" (if reforms only for new entrants).
  - Partial integration (if reforms applied to existing future service and new entrants): peak "over 2 percent of GDP in the next decade," then decline to near zero.
  - Harmonization long-run support: "about 0.6 percent of GDP" (if applied to all members) or "about 1 percent" (if only new members).
- Private sector reserves exhaustion:
  - Harmonization: "2092" (then < "0.5 percent of GDP" needed).
  - Partial integration: "2096."
- Cumulative budget support:
  - Peak at "4 percent of GDP in 2027 (5 percent under the baseline)."
  - Long-run stabilization at "1 percent of GDP annually (4 percent under the baseline)."
- Subsidy fiscal cost when targeted: "less than 0.1 percent of GDP" throughout.

*IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq*

### 7.   Closing the Coverage Gap

### 7.   Closing the Coverage Gap

### Background and key concerns
- Contributory pension coverage is projected to cater for an increasingly smaller share of older persons due to Iraq’s labor market and demographic structure.
- Contributory pension coverage for women is not projected to exceed 50 percent in the medium term.
- In the long term, only 2 in 10 older women (3 in 10 older men) will qualify for a work-related pension.
- Even ambitious targets with expanded participation in the contributory system can only materialize into effective pension coverage gains in the long term.
- Income security for people in old age is recognized as a human right in the Universal Declaration on Human Rights of 1948 and ILO Convention No. 102 on Social Security (Minimum Standards) of 1952, recently ratified by the Government of Iraq.

### Two complementary strategies to close the coverage gap
- Expand coverage of currently unregistered private sector workers through contributory schemes.
- Establish a noncontributory (government-financed) pension scheme to address the remaining coverage gap.
- International experience indicates limited potential to substantially reduce informality by expanding contributory coverage alone; some countries have extended contributory programs through simplification of rules, procedures, and packages for small contributors.
- Cost considerations may limit the coverage of a noncontributory pension; tailored contributory schemes can reach some in the informal economy (the “missing middle”).

### Expanding effective coverage of the contributory scheme in the private sector
- Policy and administrative measures suggested:
  - Gradual extension of the scope of mandatory coverage to workers in all forms of employment, with special arrangements for flexible contribution requirements (periodicity, method of calculation) per the new Social Security Law.
  - Progressive employer obligations to pay contributions where a dependent employment relation exists, including seasonal, casual, temporary, or part-time workers.
  - Awareness-raising campaigns to inform workers and employers of rights and obligations; increase accountability and transparency to build trust in the social security system.
  - Strengthen enforcement capacity to improve compliance.
  - Introduce protection against short-term risks (unemployment, maternity, employment injury, sickness) to make contributory systems more attractive; the new Social Security Law introduces important short-term benefits.
  - Offer contributory schemes tailored to informal workers (flexible and accessible means to contribute and save).
  - Consider complementary voluntary savings-based approaches for those with some capacity to save, while recognizing institutional capacity constraints of the financial sector.
- Specific measures to increase female participation and adequacy:
  - Adopt flexible mechanisms to allow participation of part-time, home-based, or diverse contracting arrangements.
  - Recognize non-gendered pension contribution credits for periods of maternity and other caring responsibilities.
  - Allow transferability of maternity benefits to the spouse.
  - Provide complementary benefits that incentivize female labor market participation (for example, insurance-linked financial support for childcare access).

- Design features in the new law and subsidy:
  - The new law introduces a subsidy for self-employed and informal workers, at 15 percent of wages.
  - Self-employed and informally employed persons’ contributions are set based on specific income categories to be determined by the Minister.

### Projected coverage scenarios for private sector (Table 6)
- Present Coverage Ratio (Low-Coverage Scenario) and Projected Coverage Rates (in 100 Years) under Medium- and High-Coverage Scenarios (percent of each category):
  - Salaried workers: Present 18.1; Medium 30.0; High 70.0
  - Self-employed: Present 0.0; Medium 11.5; High 38.0
  - Family workers: Present 0.0; Medium 0.0; High 32.0
  - Employers: Present 0.0; Medium 0.0; High 40.0
  - Total: Present 9.3; Medium 19.4; High 54.2
  - Note: In the high-coverage scenarios, it is assumed that the coverage rates indicated in the table are going to be attained after 50 years and maintained thereafter for the projection period.

- Aggregate projections:
  - Assuming implementation of legal and administrative measures and measures to make participation more attractive, the paper projects a contributory coverage of 54 percent of the private sector in the long run.
  - Under a medium scenario (modest increase among salaried workers, limited success attracting self-employed, no progress including other informal workers and employers), coverage is expected to reach only 19 percent.

### Establishing a government-financed (Pillar 0) scheme to fill the remaining gap
- Rationale:
  - Contributory expansion alone will not deliver income protection to all older persons, including current old-age cohorts and those retiring in the short to medium term.
  - Many working-age individuals (particularly women) are not in the labor force and therefore not covered by contributory schemes.
  - Demographic change will increase the number of older persons not covered by contributory pensions, even under optimistic expansion scenarios.

- Design principles for an effective Pillar 0 noncontributory pension:
  - The value of the noncontributory pension should “be sufficient to maintain the family of the beneficiary in health and decency.”
  - The value of the transfer is proposed to be set as a flat rate across options, with regular (ideally automatic) adjustments to keep up with changes in the cost of living.
  - Payments should be regular and predictable to enable recipient households to budget and plan.

- Interaction with existing social assistance (SSN) and contributory pensions:
  - Noncontributory pensions are individual entitlements distinct from the SSN program (which is household-based); interactions between benefits need consideration.
  - Options include taking the individual pension into account when assessing household eligibility or excluding social pension recipients from household size for SSN calculations.
  - For recipients of public and private contributory pensions, options include reductions (or nonreceipt) of social pensions, reductions in accrual rates, or related reduction in contribution rates to integrate Pillar 0 with other pension pillars.

### Three illustrative Pillar 0 design options (comparative features)
- Universal noncontributory pension:
  - Advantages:
    - Administratively simple with lower administrative costs.
    - Ensures by design all older persons are covered; no exclusion errors.
    - Builds social contract based on citizenship rights to social protection.
    - Significant extension of access can enhance sustainability of overall pension reforms from a political economy perspective.
    - Higher fiscal cost than targeted program, but could be associated with reduced accrual rate for contributory pillar to reduce cost.
  - Disadvantages:
    - Inclusion errors if the policy intention is to have a targeted program.
    - Expectations of automatic assistance in old age may reduce incentives to participate in contributory pension schemes, depending on benefit amounts.

- Pension-tested noncontributory pension:
  - Design: Paid to all persons in old age except those in receipt of a contributory pension for public and private sector workers.
  - Advantages:
    - Lower fiscal cost than a universal approach.
    - Low administrative costs if contributory and noncontributory information systems are linked.
  - Disadvantages:
    - Potential disincentive to formalize and make social security contributions, depending on scheme design and benefit amounts.
    - Determines eligibility based on only one source of income (pensions).

- Pension- and affluence-tested noncontributory pension:
  - Design: Excludes those receiving contributory pensions and sets an affluence threshold (income or assets) to exclude high-income individuals; aims to reach the “missing middle.”
  - Advantages:
    - Lower fiscal cost than universal or pension-tested approaches.
    - Strengthened focus on vulnerability while reaching the “missing middle.”
    - Accounts for differences in sources of incomes/assets to determine eligibility.
  - Disadvantages:
    - Highly administratively complex; likely infeasible in the short to medium term until interoperability and administrative data availability are built.
    - Exclusion errors due to targeting inefficiencies.
    - Potential negative incentives to formalization and contribution, depending on benefit amounts.

### Benefit design and illustrative costing parameters
- Benefit amount proposed for simulations: 40 percent of the minimum wage (140,000 ID initially), adjusted over time in line with CPI increases.
- Table 8 (summary in text) indicates illustrative costing for each of the three Pillar 0 options under two scenarios of projected future social security coverage (low- and high-coverage scenarios).

### Immediate fiscal cost estimates (summary)
- Immediate costs of closing the coverage gap through a government-funded Pillar 0 pension:
  - Universal approach: 0.71 percent of GDP.
  - Pension-tested approach: 0.58 percent of GDP.
  - Pension- and affluence-tested approach: 0.44 percent of GDP.
- Note: Given gradual increases in contributory coverage under low- and high-coverage scenarios, long-term fiscal implications vary; under the high-coverage option the universal approach will reach higher fiscal cost over time (detailed long-term figures appear in Table 8).

### Additional numeric and contextual facts preserved from the source
- The new private sector Social Security Law extends legal coverage to all workers, with voluntary participation for “all individuals not involved in formal work.”
- It is estimated that 40 percent of all employees in Iraq are on low pay, calculated as two-thirds of the median hourly earnings of employees at main job.
- The ILO Convention No. 102 and related international standards underpin principles for noncontributory pension design and adequacy.

*IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq — Chapter 7: Closing the Coverage Gap*

### 1.17 percent of GDP. However, there could be an offsetting 0.26 percent of GDP fiscal savings from reduced

### anea2024001 - 1.17 percent of GDP. However, there could be an offsetting 0.26 percent of GDP fiscal savings from reduced

### Cost of Different Noncontributory (Pillar 0) Scenarios
- Universal (benefit = 40 percent of minimum wage)
  - From age 65 (70) in 2024, following NRA of contributory scheme:
    - 2024, Low SS Coverage: 0.71 (0.43)
    - 2024, High SS Coverage: 0.71 (0.43)
    - 2075, Low SS Coverage: 1.17
    - 2075, High SS Coverage: 1.17
  - Minus fiscal savings from lower pension accrual rate (1.5% instead of 2.0% for future service), considering only public sector:
    - 2024: 0.00
    - 2075: —0.26
  - Net example cited: initial headline cost 1.17 percent of GDP; offsetting fiscal savings 0.26 percent of GDP could leave cost at 0.91 percent of GDP.
- Pension-tested (tested against pensions received from both public and private sector schemes)
  - From age 65 (70) in 2024, following NRA:
    - 2024, Low SS Coverage: 0.58 (0.35)
    - 2024, High SS Coverage: 0.58 (0.35)
    - 2075, Low SS Coverage: 0.86
    - 2075, High SS Coverage: 0.81
  - Long-term upper bound cost expected: 0.86 percent of GDP.
- Pension- and affluence-tested (assume affluence testing removes 25 percent of remaining caseload after pension test)
  - From age 65 (70) in 2024, following NRA:
    - 2024, Low SS Coverage: 0.44 (0.26)
    - 2024, High SS Coverage: 0.44 (0.26)
    - 2075, Low SS Coverage: 0.65
    - 2075, High SS Coverage: 0.61
  - Long-term upper bound cost expected: 0.65 percent of GDP.
- Implementation sequencing effect:
  - Short-term fiscal impact of a Pillar 0 pension could be further reduced by approximately 40 percent (for all scenarios) by adopting a gradual implementation approach with pension eligibility starting at the age of 70 and more gradually aligning to the normal retirement age.

### Financing and Fiscal Considerations
- Under baseline (no policy changes):
  - Government total spending on pension projected to increase to 5 percent of GDP and remain stably around 4 percent of GDP for the projection period (100 years).
- Pension system budgetary support projections (selected figures from Table 9):
  - Legacy pensions: 2024: 2.47; 2050: 0.67; 2075: 0.13; 2100: 0.01 (percent of GDP)
  - Pensions to martyrs, prisoners, and victims of terrorism: 2024: 1.03; 2050: 0.28; 2075: 0.04; 2100: 0.00
  - Contributory pensions (public and private): 2024: 1.10; 2050: 2.98; 2075: 3.74; 2100: 4.11 (percent of GDP)
  - Total (Baseline, No Reform): 2024: 3.60; 2050: 3.93; 2075: 3.91; 2100: 4.12 (percent of GDP)
  - Total (Reform under Harmonization): 2024: 4.08; 2050: 2.43; 2075: 1.51; 2100: 1.82 (percent of GDP)
  - Total (Reform under Partial Integration): 2024: 4.59; 2050: 1.57; 2075: 0.82; 2100: 0.82 (percent of GDP)
- Peak and long-run support estimates:
  - Total required budgetary support for legacy pensions and contributory pension system (public and private) expected to peak at 4 percent in 2024 and stabilize at 1.8 percent of GDP in the long run, under harmonization.
  - Under partial integration, total required budgetary support expected to peak at 4.6 percent of GDP in 2050, thereafter stabilizing at about 0.8 percent in the long run.
- Constraints on revenue-enhancing options:
  - Required contribution rates (to balance the SPF) estimated as: 48.4 percent for the next 10 years, 64.3 percent for the next 20 years, and 78.9 percent for the next 30 years.
  - Public sector current contribution rates: 10 percent for employees, 15 percent for employers.
  - Private sector pension contribution rate: 13 percent (5 percent for employees, 8 percent for employers); rises to 20 percent for oil companies (employer share 15 percent).
  - Protection of SPF reserves implies low-risk investments, limiting returns on invested reserves.
- Fiscal space and use of reform gains:
  - Using a portion of fiscal gains from contributory reforms could finance a universal, benefit-tested, or affluence-tested Pillar 0 pension.
  - Approximately a quarter of the cost of a government-funded, pension-tested Pillar 0 pension could be met from better targeting the newly introduced government pension contribution for formal sector workers in the private sector.

### Reform Impacts, Objectives, and Long-term Projections
- Expected fiscal impacts of proposed reforms:
  - Implementing the proposed parametric reforms under either harmonization or partial integration expected to reduce fiscal cost to around 0.7 percent of GDP by 2075, thereafter reaching between 0.1 and 1 percent of GDP by 2100.
  - Long-term cost if a Pillar 0 pension is also introduced: between 0.8 and 1.8 percent of GDP.
- Objectives achieved by proposed reforms:
  - Improve financial sustainability of national pension system.
  - Ensure replacement ratios are more aligned between public and private sectors and across future cohorts.
  - Institute regular pension indexation to maintain benefit adequacy.
  - Expand coverage of private sector workers and incentivize contributions throughout working life.
  - Reallocate public funds to extend pension protection to the most vulnerable, especially women outside the labor market.
- Distributional and broader policy context:
  - Under current policies, fiscal spending on pensions would continue to disproportionately benefit relatively better-off formal workers.
  - Pension coverage gap projected to widen, particularly for women outside the labor market and informally employed workers.
  - Long-term structural challenge: demographic transition requires rethinking the role of public spending on pensions and reallocating general budget resources toward extending adequate pension coverage to the uncovered.
  - Formalization of the informal economy and rising female labor participation are important for structural balance of contributors.

### Policy Recommendations and Implementation Guidance
- Core reform approach:
  - Apply parametric reforms consistently across public and private sector pension systems.
  - Focus reforms on eligibility and benefit rules to make the system equitable, adequate, and sustainable, rather than relying on large increases in contribution rates.
- Pillar 0 design and targeting:
  - Consider universal, pension-tested, or pension- and affluence-tested designs, with benefit set at 40 percent of minimum wage and testing mechanisms as modeled.
  - Gradual implementation (starting eligibility at age 70 and aligning to NRA over time) can reduce short-term fiscal impact by approximately 40 percent.
- Sequencing and political economy:
  - Implement reforms as a gradual, multistage, multi-year process with broad consultative engagement of government, workers’ and employers’ organizations, and other stakeholders.
  - Package sensitive measures with compensatory/popular measures and clear communication to build public support.
- Complementary measures to boost coverage and equity:
  - Consider non-gendered pension credits for family care periods, transferability of maternity benefits to the spouse, and complementary benefits such as financial access to childcare to incentivize female formal labor participation.
  - Strengthen social insurance role in addressing short-term risks (unemployment, maternity, employment injury, financial health protection).
- Further analysis:
  - Conduct full modeling of welfare impacts of different scenarios using the most recent survey data on living conditions to inform fine-tuning of policy options.

*IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq*

### 10.  References

### 10. References

### References cited
- ILO. 2018a. Social Protection for Older Persons: Policy Trends and Statistics 2017–19, Social Protection Policy Paper 17, https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—soc_sec/documents/publication/wcms_645692.pdf
- ILO. 2018b. The ILO Multi-Pillar Pension Model: Building Equitable and Sustainable Pension Systems, Social Protection for all Issue Brief, https://www.social-protection.org/gimi/Media.action;jsessionid=z-r1hgzj8pZWZ_-PVoJ1lBbJG_ S4CtlTsiiMGqVOz4Cb6g1PCsnJ6!-1367164580?id=16573
- ILO. 2021a. Extending Social Security to Workers in the Informal Economy Lessons from International Experience, Guidebook for Policymakers, Workers’ and Employers’ Organizations and Other Stakeholders, https://www.ilo.org/secsoc/information-resources/publications-and-tools/Brochures/WCMS_749431/lang--en/index.htm
- ILO. 2021b. Tripartite Round Table on Pension Trends and Reforms, Record of Proceedings, https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—soc_sec/documents/publication/wcms_789672.pdf
- International Monetary Fund. 2022. IMF Engagement on Pension Issues for Surveillance and Program Work. IMF Technical Notes and Manuals 2022/004, International Monetary Fund, Washington, DC.
- International Monetary Fund. 2023. Iraq: 2022 Article IV Consultation Staff Report, Country Report No. 2023/075, https://www.imf.org/en/Publications/CR/Issues/2023/02/03/Iraq-2022-Article-IV-Consultation-Press-Release-and-Staff-Report-529146#:~:text=IMF%20Staff%20Country%20Reports&-text=The%20formation%20of%20a%20new,oil%20revenues%20and%20accommodative%20policies..
- Palacios, Robert J., and David A. Robalino. 2020. Integrating Social Insurance and Social Assistance for the Future World of Labor. IZA Institute of Labor Economics. Discussion Paper Series No. 13258.
- World Bank. 2008. Pension Systems and Reform Conceptual Framework. World Bank Pension Reform Primer Series 45728. https://documents1.worldbank.org/curated/en/389011468314712045/pdf/457280BRI0Box31Concept1Sept20081pdf.pdf
- World Bank, with Arab Monetary Fund. 2017. Arab Pension Systems, Trends, Challenges, and Options for Reform, Other Social Protection Study, https://elibrary.worldbank.org/doi/epdf/10.1596/28221
- World Bank. 2019. Protecting All: Risk Sharing for a Diverse and Diversifying World of Work, Human Development Perspectives, https://documents1.worldbank.org/curated/en/997741568048792164/pdf/Protecting-All-Risk-Sharing-for-a-Diverse-and-Diversifying-World-of-Work.pdf

### Appendix 1 — ILO Convention No. 102: principles and implications of ratification
- Core purpose:
  - Codifies provisions and minimum standards for comprehensive social security systems covering nine branches: medical care, family benefit, maternity benefit, sickness benefit, unemployment benefit, employment injury benefit, old-age benefit, invalidity benefit, and survivors’ benefit.
- Minimum standards for each branch include:
  - A minimum percentage of the population protected in case of occurrence of one of the contingencies.
  - A minimum level of benefits, attainable via contributory and noncontributory pillars.
  - Conditions for and periods of entitlement to the prescribed benefits.
- Key principles anchored in the Convention:
  - The general responsibility of the State for provision and proper administration of social security benefits.
  - Collective financing of social security schemes.
  - Solidarity in financing: Workers should not bear more than 50 percent of the costs of each scheme, exception for employment injury where employers cover the whole cost.
  - Adequacy and predictability of benefits, including minimum guaranteed levels and benefit adjustments in line with changes in living costs.
  - Participation of persons protected in scheme management.
  - Right of appeal in case of refusal or complaint about benefits.
  - Equality of treatment for nonnational residents.
  - Flexibility for countries to gradually attain objectives reflecting national social, cultural, institutional, and development contexts.
- Ratification process and obligations:
  - Ratification commits governments to amend/reform legislation and regulations to align with Convention standards.
  - A Convention enters into application 12 months after ratification.
  - Ratifying governments regularly report progress to the ILO’s Committee of Experts on the Application of Conventions and Recommendations and the International Labour Conference’s Tripartite Committee on the Application of Conventions and Recommendations.
  - Worker and employer organizations may send observations to complement government reporting.
- Note from source: ILO C102 was recently ratified by the Government of Iraq.

### Appendix 2 — Projected demographics and macroeconomic environment in Iraq

- General assumptions and data sources:
  - Population projections based on UN World Population Prospects, the 2019 Revision.
  - Labor force projections based on preliminary results of the Labour Force Survey (LFS) 2021.
  - For 2022–2028, economic variables follow IMF economic forecasts; thereafter assumptions detailed below apply.

- Fertility and mortality:
  - Total fertility rate: 3.45 children per woman in 2020; assumed to gradually decrease to 1.95 in 2095 and stay constant thereafter.
  - Life expectancy at birth projections:
    - In 2020: 68.8 years for males, 72.7 years for females
    - In 2050: 73.9 years for males, 77.3 years for females
    - In 2080: 77.3 years for males, 80.4 years for females

- Migration (net migration per year):
  - 2020–24: 19,636 per year
  - 2025–29: −12,475 per year
  - 2030–34: −10,000 per year
  - 2035: −6,000 per year

- Selected population projection points (Appendix Table 2.1):
  - Population (Total; Males; Females)
    - 2020: 40 224 773; 20 357 699; 19 867 074
    - 2030: 50 127 952; 25 416 286; 24 711 666
    - 2040: 60 661 266; 30 796 341; 29 864 925
    - 2050: 71 157 105; 36 147 099; 35 010 006
    - 2060: 81 121 600; 41 224 458; 39 897 143
    - 2070: 90 141 816; 45 812 631; 44 329 185
    - 2080: 97 744 473; 49 659 547; 48 084 927
    - 2090: 103 711 033; 52 657 087; 51 053 946
    - 2100: 107 932 703; 54 733 952; 53 198 751
  - Growth rates of total population by decade:
    - 2020: 2.3%
    - 2030: 2.1%
    - 2040: 1.8%
    - 2050: 1.5%
    - 2060: 1.2%
    - 2070: 0.9%
    - 2080: 0.7%
    - 2090: 0.5%
    - 2100: 0.3%
  - Average age (Total; Males; Females) for selected years:
    - 2020: 24.2; 23.7; 24.7
    - 2030: 26.2; 25.7; 26.6
    - 2040: 28.2; 27.7; 28.7
    - 2050: 30.2; 29.7; 30.7
    - 2060: 32.2; 31.7; 32.7
    - 2070: 34.0; 33.5; 34.6
    - 2080: 35.8; 35.2; 36.4
    - 2090: 37.5; 36.9; 38.2
    - 2100: 39.1; 38.4; 39.8
  - Total fertility rate by decade (selected): 2020: 3.42; 2030: 3.17; 2040: 2.86; 2050: 2.62; 2060: 2.43; 2070: 2.27; 2080: 2.13; 2090: 2.01; 2100: 1.95
  - Life expectancy at birth (males; females) series reproduced in Appendix Table 2.1 (e.g., 2020: 68.8; 72.7; 2030: 70.7; 74.3; etc.).

- Population change (births, deaths, net migration per year) — selected entries from Appendix Table 2.1:
  - 2020: Births per year 913 510; Deaths per year 1 082 974; Net migration per year 19 636
  - 2030: Births per year 1 026 374; Deaths per year 1 262 376; Net migration per year −12 475
  - 2040: Births per year 1 066 370; Deaths per year 1 360 674; Net migration per year −6 000
  - 2050: Births per year 1 028 902; Deaths per year 1 413 172; Net migration per year −6 000
  - 2060: Births per year 963 960; Deaths per year 1 458 925; Net migration per year −6 000
  - 2070: Births per year 843 517; Deaths per year 1 464 337; Net migration per year −6 000
  - 2080: Births per year 688 828; Deaths per year 1 438 292; Net migration per year −6 000
  - 2090: Births per year 518 540; Deaths per year 1 395 568; Net migration per year −6 000
  - 2100: Births per year 347 501; Deaths per year 1 345 083; Net migration per year −6 000

- Labor force projections and labor market characteristics:
  - LFS 2021 indicators:
    - Labor force participation rates: Males 68.0 percent; Females 10.6 percent
    - Unemployment rate: 16.5 percent (Males 14.7 percent; Females 28.2 percent)
    - Informal employment share: 54.8 percent of total employment
  - Assumption for female participation over time:
    - Age-specific labor force participation rates of women assumed to gradually increase to reach 50 percent of those of men in 2100.
  - Selected labor force projections (Appendix Table 2.2):
    - Population (2021–2027, in thousands): 41 181; 42 138; 43 104; 44 081; 45 032; 45 990; 46 955
    - Population (15-69) (2021–2027, in thousands): 25 022; 25 738; 26 479; 27 242; 27 996; 28 769; 29 562
    - Labour force (15-69) (2021–2027, in thousands): 9 885; 10 232; 10 583; 10 941; 11 293; 11 651; 12 015
    - Labour force participation rate (total) (2021–2027): 39.5%; 39.8%; 40.0%; 40.2%; 40.3%; 40.5%; 40.6%
    - Male participation rate (2021–2027): 68.0%; 68.1%; 68.2%; 68.3%; 68.3%; 68.3%; 68.3%
    - Female participation rate (2021–2027): 10.6%; 10.9%; 11.2%; 11.5%; 11.8%; 12.1%; 12.4%
    - Employed (15-69) (2021–2027, in thousands): 8 255; 8 548; 8 846; 9 149; 9 446; 9 749; 10 055
    - Unemployed (15-69) (2021–2027, in thousands): 1 631; 1 684; 1 738; 1 793; 1 847; 1 902; 1 959
    - Unemployment rate (2021–2027): 16.5%; 16.5%; 16.4%; 16.4%; 16.4%; 16.3%; 16.3%
  - Longer-run labor force indicators (selected decades from Appendix Table 2.2):
    - Labour force participation rate (total): 2030: 41.0%; 2040: 42.8%; 2050: 44.3%; 2060: 45.6%; 2070: 47.1%; 2080: 48.3%; 2090: 49.6%; 2100: 50.9%
    - Female participation rate increases substantially over the century (e.g., 2030: 13.2%; 2040: 16.3%; 2050: 19.3%; 2060: 22.1%; 2070: 25.1%; 2080: 27.8%; 2090: 30.7%; 2100: 33.6%)
    - Growth rate of employed population declines over time: 2030: 3.0%; 2040: 2.4%; 2050: 2.0%; 2060: 1.9%; 2070: 1.6%; 2080: 1.2%; 2090: 0.9%; 2100: 0.4%

- Macroeconomic framework and key assumptions:
  - Global real GDP growth assumed constant at 2.2 percent for long run.
  - Non-oil real GDP growth after 2028:
    - Non-oil real GDP growth at 3.5 percent in 2029, gradually merging into 2.2 percent in 2100.
  - Productivity growth calculated as non-oil GDP growth rate divided by total employment (per labor force projections).
  - Nominal wage increase = CPI increase + productivity growth, with minimum set equal to CPI increase (if productivity negative).
    - Implied real wage increase: 0.4 percent in 2029, gradually increasing to 1.7 percent in 2100.
  - Fund rate of return (nominal) assumed: 3.0% (series repeated across projection tables).

- Selected macroeconomic projections (Appendix Table 2.3) — 2021–2027 sample:
  - GDP at Currents Prices (in billions): 299 450; 392 028; 352 555; 361 174; 375 836; 392 350; 409 414
  - Growth rate of Nominal GDP in percent: 48.5%; 30.9%; —; 10.1%; 2.4%; 4.1%; 4.4%; 4.3%
  - GDP at Constant 2021 Prices (in billions): 299 450; 323 816; 335 702; 346 198; 355 340; 363 989; 371 937
  - Growth rate of real GDP in percent (2021–2027): 7.7%; 8.1%; 3.7%; 3.1%; 2.6%; 2.4%; 2.2%
  - Non-oil GDP at Constant 2021 Prices (in billions): 163 766; 169 021; 173 754; 181 024; 187 980; 194 755; 201 643
  - Growth rate of real non-oil GDP in percent (2021–2027): 21.1%; 3.2%; 2.8%; 4.2%; 3.8%; 3.6%; 3.5%
  - GDP deflator (index): 100.0; 121.1; 105.0; 104.3; 105.8; 107.8; 110.1
  - Growth rate of GDP deflator: 37.9%; 21.1%; —; 13.3%; —0.7%; 1.4%; 1.9%; 2.1%
  - Consumer Price Index (index): 100.0; 105.0; 112.0; 113.8; 116.3; 119.0; 121.5
  - Growth rate of CPI (2021–2027): 6.0%; 5.0%; 6.6%; 1.6%; 2.2%; 2.3%; 2.1%
  - Productivity per worker (non-oil) (selected years): 19 839; 19 774; 19 643; 19 787; 19 900; 19 978; 20 053
  - Productivity growth rate in percent: —0.3%; —0.7%; 0.7%; 0.6%; 0.4%; 0.4%
  - Nominal wage growth (ILO approach) (2021–2027): 5.0%; 6.6%; 2.4%; 2.8%; 2.7%; 2.5%
- Long-run macro series (selected decades from Appendix Table 2.3):
  - GDP at Current Prices (selected years): 2028: 427 834; 2029: 445 937; 2030: 464 806; 2040: 703 489; 2050: 1 064 737; 2060: 1 611 489; 2070: 2 439 004; 2080: 3 691 456; 2090: 5 587 054; 2100: 8 456 060
  - Growth rate of real GDP stabilized at 2.2% in long run (per projection assumptions).
  - Non-oil GDP at Constant 2021 Prices and growth decline gradually toward 2.2% by 2100 (specific series provided in table).
  - GDP deflator growth rates and CPI growth rates shown as stable 2.0% in long run for many decades in the table.
  - Productivity per worker (non-oil) rises over long run (e.g., 2028: 20 135; 2100: 51 740) with productivity growth reaching 1.7% by 2100.
  - Rate of return of the fund (nominal): 3.0% consistent across projections.

### Appendix 3 — Public sector scheme assumptions and stylized empirical profiles
- Retirement rates:
  - Calibrated to match the data on the number of SPF pensioners in payment at the end of 2022 (data received in April 2023).
- Graphical empirical profiles (figures described in appendix; data sources: Iraqi authorities’ data and authors’ calculations):
  - Appendix Figure 3.1: Number of Contributors by Age and Gender, 2021 (contributors in thousands by age cohorts).
  - Appendix Figure 3.2: Distribution of New Contributors by Age and Gender, 2021 (percentage distribution by age and gender of new contributors).
  - Appendix Figure 3.3: Average Length of Service at Retirement by Age and Gender, 2021.
  - Appendix Figure 3.4: Average Monthly Basic Wage (by age cohort).
  - Appendix Figure 3.5: Average Monthly Pension (by age cohort).
  - Appendix Figure 3.6: Number of Old-Age Beneficiaries by Age and Gender, 2021 (old-age pensioners in '000).
  - Appendix Figure 3.7: Pensions in Payment by Gender, 2022 — budget-financed pensions in payment and contributory pensions in payment disaggregated by categories (Legacy, Martyrs, Prisoners, Victims of terrorism; Public sector vs Private sector) and by gender.

_Italic: IMF/ILO/World Bank Analytical Note • Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq — excerpts from "10. References" and Appendices as provided in the source PDF._

### Appendix Table 3.1: Retirement Rates for Males and Females

### Appendix Table 3.1: Retirement Rates for Males and Females

### Retirement rates — Males (Age by Year: 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+)
- Age 49: 0.0% 0.1% 0.2% 0.4% 0.5% 0.6% 0.7% 0.8% 1.0% 1.1%
- Age 50: 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8%
- Age 51: 0.0% 0.2% 0.5% 0.7% 0.9% 1.2% 1.4% 1.6% 1.9% 2.1%
- Age 52: 0.0% 0.3% 0.6% 0.8% 1.1% 1.4% 1.7% 2.0% 2.3% 2.5%
- Age 53: 0.0% 0.3% 0.6% 0.9% 1.2% 1.5% 1.8% 2.1% 2.4% 2.7%
- Age 54: 0.0% 0.3% 0.6% 0.9% 1.2% 1.5% 1.8% 2.1% 2.4% 2.7%
- Age 55: 0.0% 0.3% 0.6% 0.8% 1.1% 1.4% 1.7% 1.9% 2.2% 2.5%
- Age 56: 0.0% 0.3% 0.6% 0.8% 1.1% 1.4% 1.7% 1.9% 2.2% 2.5%
- Age 57: 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
- Age 58: 0.0% 1.3% 2.5% 3.8% 5.0% 6.3% 7.5% 8.8% 10.0% 11.3%
- Age 59: 0.0% 6.7% 13.3% 20.0% 26.7% 33.3% 40.0% 46.7% 53.3% 60.0%
- Age 60: 0.0% 7.8% 15.6% 23.3% 31.1% 38.9% 46.7% 54.4% 62.2% 70.0%
- Age 61: 0.0% 0.0% 11.3% 22.5% 33.8% 45.0% 56.3% 67.5% 78.8% 90.0%
- Age 62: 0.0% 0.0% 0.0% 14.3% 28.6% 42.9% 57.1% 71.4% 85.7% 100.0%
- Age 63: 0.0% 0.0% 0.0% 0.0% 16.7% 33.3% 50.0% 66.7% 83.3% 100.0%
- Age 64: 0.0% 0.0% 0.0% 0.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
- Age 65: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 25.0% 50.0% 75.0% 100.0%
- Age 66: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 33.3% 66.7% 100.0%
- Age 67: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 50.0% 100.0%
- Age 68: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
- Age 69: 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Source note: Authors’ simulations based on ILO actuarial and World Bank PROST models.

### Retirement rates — Females (Age by Year: 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+)
- Age 49: 0.0% 0.1% 0.2% 0.2% 0.3% 0.4% 0.5% 0.6% 0.6% 0.7%
- Age 50: 0.0% 0.1% 0.2% 0.3% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0%
- Age 51: 0.0% 0.1% 0.3% 0.4% 0.5% 0.7% 0.8% 1.0% 1.1% 1.2%
- Age 52: 0.0% 0.2% 0.4% 0.5% 0.7% 0.9% 1.1% 1.2% 1.4% 1.6%
- Age 53: 0.0% 0.2% 0.4% 0.7% 0.9% 1.1% 1.3% 1.5% 1.8% 2.0%
- Age 54: 0.0% 0.2% 0.5% 0.7% 1.0% 1.2% 1.5% 1.7% 2.0% 2.2%
- Age 55: 0.0% 0.3% 0.6% 0.8% 1.1% 1.4% 1.7% 2.0% 2.2% 2.5%
- Age 56: 0.0% 0.3% 0.6% 0.9% 1.2% 1.5% 1.8% 2.1% 2.4% 2.7%
- Age 57: 0.0% 0.6% 1.1% 1.7% 2.2% 2.8% 3.4% 3.9% 4.5% 5.0%
- Age 58: 0.0% 1.3% 2.6% 4.0% 5.3% 6.6% 7.9% 9.3% 10.6% 11.9%
- Age 59: 0.0% 6.7% 13.3% 20.0% 26.7% 33.3% 40.0% 46.7% 53.3% 60.0%
- Age 60: 0.0% 7.8% 15.6% 23.3% 31.1% 38.9% 46.7% 54.4% 62.2% 70.0%
- Age 61: 0.0% 0.0% 11.3% 22.5% 33.8% 45.0% 56.3% 67.5% 78.8% 90.0%
- Age 62: 0.0% 0.0% 0.0% 14.3% 28.6% 42.9% 57.1% 71.4% 85.7% 100.0%
- Age 63: 0.0% 0.0% 0.0% 0.0% 16.7% 33.3% 50.0% 66.7% 83.3% 100.0%
- Age 64: 0.0% 0.0% 0.0% 0.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
- Age 65: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 25.0% 50.0% 75.0% 100.0%
- Age 66: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 33.3% 66.7% 100.0%
- Age 67: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 50.0% 100.0%
- Age 68: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
- Age 69: 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Source note: Authors’ simulations based on ILO actuarial and World Bank PROST models.

---

### Growth of the insured population (Public sector)
- Target for 2100: covered population in the public sector will represent 15 percent of the labor force in 2100 (14 percent for males and 17 percent for females).

---

### Appendix Table 3.2: Number of Contributors and Pensioners under the Public Sector Scheme (selected years)
- Year 2022: Number of Contributors 2 986 000; Number of pensioners — Old age 392 296; Invalidity 17 789; Widows/Widowers 106 912; Orphans 155 037; Total pensioners 672 034; Ratio of contributors to pensioners 4.44
- Year 2023: Number of Contributors 3 069 466; Number of pensioners — Old age 420 081; Invalidity 21 386; Widows/Widowers 129 866; Orphans 196 456; Total pensioners 767 788; Ratio 4.00
- Year 2024: Number of Contributors 3 153 401; Number of pensioners — Old age 466 520; Invalidity 24 991; Widows/Widowers 154 274; Orphans 235 007; Total pensioners 880 792; Ratio 3.58
- Year 2025: Number of Contributors 3 234 196; Number of pensioners — Old age 531 762; Invalidity 28 550; Widows/Widowers 180 053; Orphans 268 204; Total pensioners 1 008 568; Ratio 3.21
- Year 2030: Number of Contributors 3 644 058; Number of pensioners — Old age 1 083 523; Invalidity 44 972; Widows/Widowers 328 956; Orphans 359 225; Total pensioners 1 816 677; Ratio 2.01
- Year 2040: Number of Contributors 4 412 188; Number of pensioners — Old age 1 707 151; Invalidity 77 551; Widows/Widowers 701 379; Orphans 475 618; Total pensioners 2 961 699; Ratio 1.49
- Year 2050: Number of Contributors 5 052 681; Number of pensioners — Old age 2 387 388; Invalidity 111 570; Widows/Widowers 1 078 296; Orphans 592 150; Total pensioners 4 169 404; Ratio 1.21
- Year 2060: Number of Contributors 5 537 055; Number of pensioners — Old age 3 167 626; Invalidity 144 805; Widows/Widowers 1 414 541; Orphans 691 390; Total pensioners 5 418 362; Ratio 1.02
- Year 2070: Number of Contributors 5 818 471; Number of pensioners — Old age 3 880 315; Invalidity 173 957; Widows/Widowers 1 732 137; Orphans 801 847; Total pensioners 6 588 256; Ratio 0.88
- Year 2080: Number of Contributors 5 862 628; Number of pensioners — Old age 4 480 987; Invalidity 197 620; Widows/Widowers 1 994 902; Orphans 896 725; Total pensioners 7 570 234; Ratio 0.77
- Year 2090: Number of Contributors 5 717 018; Number of pensioners — Old age 4 948 675; Invalidity 213 840; Widows/Widowers 2 186 503; Orphans 967 235; Total pensioners 8 316 253; Ratio 0.69
- Year 2100: Number of Contributors 5 380 765; Number of pensioners — Old age 5 246 086; Invalidity 220 138; Widows/Widowers 2 329 062; Orphans 1 013 759; Total pensioners 8 809 044; Ratio 0.61
- Year 2110: Number of Contributors 5 399 149; Number of pensioners — Old age 5 364 349; Invalidity 217 734; Widows/Widowers 2 414 804; Orphans 1 035 299; Total pensioners 9 032 186; Ratio 0.60
- Year 2120: Number of Contributors 5 341 502; Number of pensioners — Old age 5 355 232; Invalidity 214 401; Widows/Widowers 2 437 791; Orphans 1 035 565; Total pensioners 9 042 988; Ratio 0.59

### Other public-sector assumptions
- Indexation of the minimum pension: minimum pension 500,000 ID in 2022; indexed in line with wages from 2023 onward.
- Indexation of pensions in payment: pensions in payment indexed with CPI (and assumed not to catch up with the minimum pension if minimum exceeds pensions in payment).
- Reserve amount at valuation date: starting reserve amount as of end-2021 set at ID 11,580,450 million.

---

### Appendix 4: Private Sector Scheme Assumptions

### Appendix Table 4.1: Number and Average Monthly Earnings of Actively Insured Persons by Age and Gender, as of December 31, 2021
- Male / Female columns: Age — Number — Average Monthly Earnings
- Age 16–19: Male 4,271 439,564; Female 222 480,832
- Age 20–24: Male 30,257 543,248; Female 3,092 571,833
- Age 25–29: Male 83,975 793,846; Female 13,038 675,572
- Age 30–34: Male 85,450 854,279; Female 11,692 714,425
- Age 35–39: Male 67,458 856,729; Female 8,309 714,239
- Age 40–44: Male 49,742 755,685; Female 6,902 710,641
- Age 45–49: Male 41,090 663,072; Female 5,759 654,765
- Age 50–54: Male 32,238 564,678; Female 4,073 618,132
- Age 55–59: Male 21,578 549,112; Female 2,052 684,289
- Age 60–64: Male 19,178 514 , 8 371, 49 2595, 421  (source text contains formatting irregularity)
- Age 65–69: Male 7,622 518,539; Female 511 438,147
- Total: Male 442,860 732,699; Female 57,140 676,919

Note: No precise data on the exact number of private sector insured members in 2021; assumed 500,000 total private sector contributors in 2021.

### Salary scales (Appendix Table 4.2: Ultimate Salary Scales by Age and Gender)
- Age 15: Male 1.000; Female 1.000
- Age 20: Male 1.274; Female 1.180
- Age 25: Male 1.548; Female 1.361
- Age 30: Male 1.822; Female 1.541
- Age 35: Male 2.096; Female 1.695
- Age 40: Male 2.191; Female 1.745
- Age 45: Male 2.241; Female 1.795
- Age 50: Male 2.291; Female 1.845
- Age 55: Male 2.341; Female 1.895
- Age 60: Male 2.391; Female 1.945
- Age 65: Male 2.391; Female 1.945

- Earnings brackets: insured population separated into three earnings brackets — lowest 30 percent, medium 40 percent, highest 30 percent — with separate salary scales for each bracket.

### Projected growth of the insured population (Private sector)
- Status quo: private sector insured population assumed to increase at same rate as total employed population for whole projection period; private sector insured persons represent constant 18.1 percent of private sector employment (9.3 percent of total employment).
- Reform (medium coverage scenario): proposed measures lead to 30 percent of private sector salaried and 11.5 percent of self-employed covered by social security in 2120; implies 19.4 percent of all private sector workers covered by social security in 2120.
- A high-coverage scenario is also considered.

### Coverage scenarios by sector of employment (Appendix Table 4.3)
- Present Coverage Rate / Projected Coverage Rate (in 100 Years)
- Salaried workers: 18.1 30.0 70.0
- Self-employed: 0.0 11.5 38.0
- Family workers: 0.0 0.0 32.0
- Employers: 0.0 0.0 40.0
- Total: 9.3 19.4 54.2

### Accrued past credits
- Distribution of accrued past credits for public sector used for private sector; data shown in Appendix Table 4.4.

### Appendix Table 4.4: Average Past Contribution Years of Insured Persons, by Age and Gender
- Age 20: Male 1.9; Female 1.7
- Age 25: Male 4.5; Female 3.8
- Age 30: Male 7.0; Female 6.7
- Age 35: Male 9.5; Female 10.4
- Age 40: Male 11.8; Female 14.8
- Age 45: Male 14.2; Female 18.7
- Age 50: Male 18.1; Female 23.5
- Age 55: Male 21.6; Female 29.3
- Age 60: Male 29.2; Female 33.0

### Mortality and disability assumptions
- Mortality: mortality rates for insured population = mortality rates of general population; projected to decline continuously with assumed increase of average life expectancy.
- Invalidity pensioners: mortality rates assumed equal to five times general population at age 20, decreasing linearly to three times at age 60.
- Disability incidence (Appendix Table 4.5: Disability Incidence Rates by Age and Gender)
  - Age 25: Male 0.0001; Female 0.0005
  - Age 30: Male 0.0001; Female 0.0003
  - Age 35: Male 0.0002; Female 0.0011
  - Age 40: Male 0.0003; Female 0.0020
  - Age 45: Male 0.0005; Female 0.0034
  - Age 50: Male 0.0006; Female 0.0043
  - Age 55: Male 0.0008; Female 0.0054
  - Age 60: Male 0.0013; Female 0.0101
- Assumed among new disability pensioners: 40 percent are partially disabled.
- Conservatively assumed all new invalid persons have degree of invalidity 100 percent; pension supplement for work accidents/diseases ignored in projection.

### Retirement behavior and initial retirement rates
- Due to insufficient private sector data, retirement rates under Draft law provisions established theoretically considering public sector experience.
- For projections under the ILO proposal, retirement rates gradually moved to higher average ages consistent with proposed increase of legal retirement age to 65 over next 15 years and increase in life expectancy thereafter.
- Appendix Table 4.6: Initial Retirement Rates by Age and Gender (selected ages)
  - Age 49: Male 5.0% Female 5.0%
  - Age 50: Male 5.0% Female 5.0%
  - Age 51: Male 5.0% Female 5.0%
  - Age 52: Male 5.0% Female 5.0%
  - Age 53: Male 5.0% Female 5.0%
  - Age 54: Male 5.0% Female 25.0%
  - Age 55: Male 5.0% Female 5.0%
  - Age 56: Male 5.0% Female 5.0%
  - Age 57: Male 5.0% Female 50.0%
  - Age 58: Male 5.0% Female 25.0%
  - Age 59: Male 25.0% Female 25.0%
  - Age 60: Male 5.0% Female 25.0%
  - Age 61: Male 5.0% Female 25.0%
  - Age 62: Male 50.0% Female 25.0%
  - Age 63: Male 25.0% Female 25.0%
  - Age 64: Male 25.0% Female 25.0%
  - Age 65: Male 25.0% Female 25.0%
  - Age 66: Male 25.0% Female 25.0%
  - Age 67: Male 25.0% Female 25.0%
  - Age 68: Male 25.0% Female 25.0%
  - Age 69: Male 100.0% Female 100.0%

### Family statistics (survivors’ benefits)
- Assumptions on probability of having an eligible spouse, average age of spouse, average number of children/other survivors, and average age of other survivors established based on experience of another country of the region; adjusted for female contributors based on scheme’s experience. (Detailed values shown in Appendix Table 4.7.)

### Other assumptions (private and combined schemes)
- Indexation of pensions in payment: pensions in payment indexed in line with CPI increases.
- Minimum wage: set equal to 350,000 ID per month in 2021. Minimum wage, maximum insurable earnings, and minimum pension (under reform) assumed to follow general wage increase over time.
- Separation of insured earnings: 25 percent of total insured earnings for oil sector at valuation date; percentage assumed to gradually decrease to zero in 2100.
- Administrative expenses: represented on average 6.3 percent of contributions in private sector over last three years; assumed globally 5 percent of contributions of combined schemes in 2016 and projected to remain equal to that (indexed annually by general wage increase).

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### Estimated pensions in payment in 2021 (selected tables)
- Appendix Table 4.8: Factor Adjustments for the Number of Pension Payments (Male / Female)
  - Old age: Male 3.33 Female 2.18
  - Invalidity: Male 1.00 Female 2.25
  - Widows: Male 1.87 Female 1.08

- Appendix Table 4.9: Pensions in Payment at the End of 2021 for Males, by Age and Type of Pension (selected totals)
  - Total Old age: Number 22,384; Average Monthly Pension 598,102
  - Total Invalidity: Number 1,245; Average Monthly Pension 722,922
  - Total Widows: Number 13,915; Average Monthly Pension 463,160

- Appendix Table 4.10: Pensions in Payment at the End of 2021 for Females, by Age and Type of Pension (selected totals)
  - Total Old age: Number 2,579; Average Monthly Pension 566,935
  - Total Invalidity: Number 459; Average Monthly Pension 594,828
  - Total Widows: Number 395; Average Monthly Pension 476,180

*Source: Authors’ simulations based on ILO actuarial and World Bank PROST models; IMF/ILO/World Bank Analytical Note — Toward an Inclusive, Equitable, and Sustainable National Pension System in Iraq.*

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_Source: https://www.imf.org/-/media/files/publications/analytical-notes/2024/english/anea2024001.pdf_