The pension reform explained: what changed, what was dropped, what happens in 2027
A new State Age Pension starts on 1 January 2027. The means test was dropped within days, the flexible retirement age stays. What you will get, who is affected, and the Rs 6.2bn question that remains.
In short
From 1 January 2027 the universal Basic Retirement Pension (BRP) becomes the State Age Pension (SAP). The CSG retirement benefits (Rs 1,000 at 65, Rs 2,500 at 75) are folded in.
You can start your pension at any age between 60 and 70. Before 65 it is reduced by 0.5% a month (6% a year) for life; after 65 it rises by 0.75% a month (9% a year). At 60 that means Rs 11,589; at 65 Rs 16,555; at 70 Rs 24,005.
The proposed means test, cutting the pension by 50 cents for every rupee of income above Rs 14,000, was frozen on 22 June and removed from the Finance Act passed on 2 August (55 votes to 6).
Dropping it costs about Rs 6.2bn in the first half of 2027 (0.7% of GDP). The Government has not yet said exactly how this gap will be filled.
The planned overhaul of the contributory pension (the new NPF with individual accounts) was withdrawn for consultation; CSG, the PRGF and the NSF continue for now.
Why reform at all
The basic pension has been paid to everyone of pension age since 1958, financed entirely from today's taxes. Its cost rose from Rs 5.97 billion in 2010 to Rs 55.4 billion in 2024-25: 24.5% of the Government's recurrent spending (Mauritius Times). Commentators project it could reach around Rs 100 billion by 2035 on current rules.
The reason is demographic: Mauritius has one of the oldest populations in Africa. The share of people aged 65+ has risen from 10.9% in 2019 to 14.1% in 2025, birth rates are about 1.4 children per woman, and the Budget says there are 4.7 workers per pensioner today, heading for 3.0 by 2049.
Step 1: June 2025: raising the pension age
The 2025-26 Budget began moving the BRP eligibility age from 60 towards 65, with a transition for people reaching 60 from September 2026. To soften it, people aged 60+ who were not yet eligible received an income support, raised from Rs 10,000 to Rs 10,370 a month from January 2026. The measure was deeply unpopular, especially among manual workers who cannot realistically work to 65.
The 2026-27 Budget discontinues that gradual age increase from 31 December 2026 and replaces it with the more flexible State Age Pension. The income support ends in December 2026.
Step 2: the State Age Pension (from 1 January 2027)
Under the SAP, you choose when to start, any month from 60 to 70, and the choice is permanent. The full amount is set at 65 (Rs 16,555). Starting earlier reduces it for life; starting later increases it for life. Extra amounts at 75, 90 and 100 continue as under the BRP, as does the December bonus.
People who reach 60 between September 2026 and August 2029 are in a transition: their “pension age” is between 62 and 64, so the reduction for starting at 60 is smaller. For example, someone turning 60 in January 2027 (pension age January 2029) gets Rs 13,688 if they start at 60, instead of Rs 11,589. A new residency rule also applies: at least 15 years' residence since age 40, including the 3 years before claiming.
Step 3: the means test, proposed on 19 June, frozen on 22 June
The Budget proposed that the SAP be reduced by 50 cents for every rupee of monthly income above Rs 14,000 (wages, business, rent and private pensions, but not dividends, interest or lump sums), down to a minimum of Rs 1,000, and stopped entirely above Rs 50,000. Couples both drawing the SAP faced an extra test, capped at a 25% reduction.
Trade unions called it unjust; critics noted it hit middle-income workers and people with occupational pensions while exempting income from savings. Three days after the Budget, the Prime Minister froze the means test. In Parliament on 15 July he confirmed it was abandoned, put its cost at Rs 6.2 billion for January-June 2027 and listed six ways to compensate: reviewing public investment priorities, cutting ministerial spending, public-sector efficiency, a broad tax reform with IMF support, possible asset sales and adjusting contribution allocations. The Finance Act passed on 2 August removed the means test and added a mechanism to index the pension to the cost of living.
Who is affected, and how
Seven typical situations, comparing the old rules, the June proposal and what was finally enacted.
What happens now
Between now and January 2027, the Ministry of Social Security and the MRA must set up the SAP: people approaching 60 will need to decide when to claim. The Budget also proposed replacing the CSG and the PRGF from 1 July 2027 with a revamped, defined-contribution National Pensions Fund: 1.5% (employee) and 7.5% (employer) of basic salary up to Rs 50,000 a month, and 3.0% and 10.5% above that, up to Rs 225,000. Those provisions were removed from the Finance Bill and will go to national consultation; until new legislation is passed, the CSG, the PRGF and the National Savings Fund continue as before.
The big unanswered question is financing. The means test was the only measure in the reform that saved money in the short term. Without it, the pension bill continues to grow with ageing, and the Rs 6.2 billion for the first half of 2027 (roughly double for a full year) must come from somewhere else.