The policy of expanding early retirement in Jordan has become one of the most costly and impactful policies affecting the sustainability of the social security system, as it directly disrupts a fundamental equation upon which any sound insurance system is based (the length of contribution versus the length of benefit).
اضافة اعلان
When early exit from the labor market expands, the number of years of actual contributions decreases while the number of years of pension disbursement increases, deepening the financing gap between insurance revenues and pension expenditures and weakening the Fund’s ability to delay the break-even points highlighted by the results of the eleventh actuarial study, a risk that we have long warned against.
Data from the Social Security Corporation indicate that early retirees constitute about 64 percent of total retirees and receive around 61 percent of the total pension payroll. These figures show that early retirement has become the dominant pattern, imposing a long-term burden on the pension fund and constraining the financial safety margin available to the system.
The government bears a central responsibility in this path as the largest employer in Jordan that refers its employees to early retirement. In the public sector, early retirement has been used as an administrative tool to address surplus staffing, restructuring, or administrative modernization.
The practical result is that the cost of these administrative decisions is shifted from the general budget to the Social Security Fund, meaning that current and future contributors bear the consequences of employment and human resource management policies that should have been handled through civil service instruments and public expenditure. Available figures confirm that nearly 60 percent of all early retirees were employed in the public sector, making the regulation of early retirement referrals in government entities one of the most important entry points for financial reform to enhance the Fund’s sustainability. In this context, we affirm that the Council of Ministers’ decision taken weeks ago to cancel the referral of employees to retirement after completing 30 years of service was a step in the right direction.
In contrast, early retirement in the private sector takes a different form; it is generally not the result of forced referrals, but rather an economically driven choice linked to low wages relative to living costs. According to the Social Security Corporation’s 2024 annual report, 54 percent of insured workers earn monthly wages of 500 dinars or less, and 72 percent earn 600 dinars or less.
Given such fragile incomes, some workers resort to early retirement in order to secure a pension, then return to the labor market to obtain additional income that covers their families’ basic needs. Thus, a costly cycle is created: higher early retirement costs for the Fund and fewer job opportunities available to young new entrants to the labor market, which increases unemployment rates.
When compared to international practices, reports by the Organisation for Economic Co-operation and Development (OECD) indicate that the average early retirement age in member countries is about 63 years, roughly two years below the statutory old-age retirement age, with a general trend toward raising this average in the future to around 64 years.
Accordingly, reforming early retirement in Jordan must be based on a dual approach: regulating government procedures and addressing the economic drivers in the private sector through more equitable wage policies. Simply tightening early retirement conditions in the private sector, without improving the economic feasibility of remaining in work, will reproduce the problem in different forms.
Therefore, we propose a reform package that includes legally restricting early retirement and limiting it to voluntary cases and hazardous and arduous occupations; raising the minimum actual contribution period required for eligibility for early retirement to 300 months for both men and women; and reducing the gap between old-age retirement and early retirement to less than five years within a defined formula.
In parallel, the government’s authority to refer employees to early retirement should be curtailed, the Treasury should be obligated to bear any additional costs resulting from exceptional decisions instead of transferring them to the Social Security Fund, and a supervisory committee should be established comprising representatives of the government, workers, and employers to review and pre-approve any collective or exceptional early retirement cases based on clear social, economic, and actuarial criteria.
This should be accompanied by a review of wage policies toward gradual increases and linking wages to living costs, along with developing incentives to remain in work through improving the pension calculation formula in relation to additional years of contribution.
