• The current Civil Pension Law was issued on 19/2/81 AH, in the absence of much of the necessary information that the means available at that time were insufficient to provide. Consequently, the Law relied—mostly—in arranging its provisions on theoretical foundations.

• However, during the period that elapsed since the issuance of this Law, several developments occurred, including: -

• 1) An unexpected development in the size of employment, resulting in an increase in pension contributions over ten years amounting to (273,338%).

• 2) The availability of a large body of employee data through the assistance of computers, which made it possible to identify employee service rates and incomes and to establish standard data for developing such incomes.

• 3) The availability of successive reports prepared by the actuary, which made it possible to determine the ability of the Pension Fund to bear its obligations.

• As a result of these matters, it became appropriate to amend the Civil Pension Law and increase the benefits of persons benefiting from its provisions in order to achieve its purposes.

• In making these amendments, it was necessary to observe the following principles in the order set out below: -

• First: Maintaining the financial balance of the Fund. This principle is, in reality, an expression of the financial limits within which the provisions of the Pension Law may be established.

• Second: Achieving the maximum possible level of security for the employee and his dependants against the economic needs arising from the employee’s loss of his employment income upon termination of his service. This principle is, in reality, an expression of the fundamental purpose for which the Pension Law exists.

• Third: Observing the requirements of justice by establishing a degree of balance between the benefits that the Law undertakes to provide to the employee and the contributions paid to the Fund on his behalf. In view of the contingent nature of the Law’s provisions, this principle does not seek to place beneficiaries in an equal position with respect to their contingent subjection to the provisions of the Law, since this matter must be observed absolutely. Rather, the purpose of the principle is, insofar as possible, to ensure that the benefits of some categories of beneficiaries are not provided at the expense of the burdens borne by others. The qualification “insofar as possible” is used because, where this principle conflicts with the second principle, the second principle takes precedence. This explains the provisions relating to special benefits for persons whose service ends by death or incapacity for work, or relating to the establishment of minimum or maximum limits for pensions. It also explains a fundamental fact that is sometimes absent from the minds of many, namely, that the Pension Law, by its nature, is an insurance law and not a savings law. In other words, its provisions are based on contingency, and this means that it cannot be assumed that a person will receive from the Fund financial benefits equal to the amounts paid to the Fund on his behalf. A person may join the service and, before any significant amounts have been paid to the Fund on his behalf, die or become incapacitated, whereupon he or his family may continue to receive from the Fund, for a prolonged period, a pension equal to forty percent of his salary. Conversely, a person may remain in government service for a prolonged period and substantial amounts may be paid to the Fund on his behalf, after which his service may end by death without there being any beneficiary entitled to a pension, in which case the Fund bears no pension liability on his behalf. This concept must be accepted because, as stated above, it is the foundation of the Pension Law as an insurance law. As previously stated, this concept is what achieves the fundamental objective of the Law, namely, securing an income sufficient to meet the economic needs arising from the employee’s loss, or his family’s loss, of income as a result of the termination of his service.

• Fourth: Maintaining the simplicity of the Law by including only the rules governing prevailing cases, without burdening it with details in an attempt to address rare or limited cases through special provisions, since provisions are formulated for prevailing circumstances, whereas rare circumstances should not have specific provisions. Attempting to investigate various hypothetical situations and address them through specific provisions is a common defect in the laws of countries passing through the early stages of legislative development. This defect is not limited in its adverse effects to obstructing the achievement of the Law’s fundamental objectives. The provisions of Part One of the current Law have remained unchanged, except for minor amendments necessitated, for the most part, by the need for clarification, and except for the rule concerning the transfer of rights and obligations, since changes in economic circumstances necessitated reconsideration of existing pensions. Accordingly, Article (11) of the proposed Law includes special regulations for increasing such pensions.

• The provisions of the proposed Law generally followed an approach similar to that of the current Law, while adopting certain amendments, most of which were necessitated by the need to increase the benefits of persons benefiting from the Law.

• Article (16) of the proposed Law amended Article (17) of the current Law by providing that the period counted for pension purposes is the period during which the officeholder was subject to the previous Civil Pension Laws, in observance of (word erased) the Royal Protocols issued to provide for the counting of certain periods of service that do not satisfy the requirement set out in Article (2). Article (16) of the proposed Law deleted the provision contained in Article (17) of the current Law excluding from the periods counted as service any service after the age of sixty where, at the age of sixty, the employee had more than (37/5) years of counted service, since it was considered sufficient in this regard to rely on the provision of the proposed Law setting the maximum pension at no more than (4/5) of the employee’s average salary during the last two years of his service. Article (16) also deleted the provision contained in Article (17) of the current Law excluding from the period counted as service periods of temporary dismissal, since this exception was no longer necessary because this penalty no longer exists following the entry into force of the Employees’ Disciplinary Law issued by Royal Decree No. (M/7) dated 1/2/1391 AH. Article (17) of the proposed Law amended Article (24) of the current Law by specifying the amount of the monthly installment payable by an employee granted study leave in settlement of the deductions due for the leave period. Article (17) also deleted the provision in Article (24) that applied the rule governing an employee on secondment or leave to a scholarship recipient, because, where the scholarship recipient is an employee, the rule governing the collection of pension deductions from him differs from the rule applicable to an employee on secondment or leave, whereas, if he is not an employee, the Pension Law does not apply to him. Article (19) of the proposed Law amended Articles (21) and (22) of the current Law. The principal change introduced by this amendment is the provision that the ordinary pension shall be calculated at the rate of one-fortieth of the average monthly salary during the last two years, instead of one-fiftieth of that average as provided under the current Law. This represents an increase in the pension of twenty-five percent (25%). It also provides that the maximum pension shall be four-fifths of the aforementioned average, instead of the current Law’s provision that, in certain cases, the maximum shall be three-quarters of that average, or that it shall have a limit as in other cases.

• Article (20) of the proposed Law amended Articles (19) and (20) of the current Law by providing that the minimum pension for a person whose service ended due to death or incapacity for work shall be forty percent of his last monthly salary, instead of one-third of the salary.

• Article (21) of the proposed Law likewise amended Article (23) of the current Law by providing that the pension of an employee whose service ended due to death or total incapacity arising from work performed in the course of his duties shall be four-fifths of the employee’s last salary, instead of the minimum pension prescribed by the current Law in these two cases, which may not be less than three-quarters of the last salary.

• The amendment made by Article (22) of the proposed Law to Article (25) of the current Law concerned the wording only, in order to avoid the difficulties that arose upon implementation, while adding a provision concerning the maximum pension of a Minister.

• Articles (24) and (25) of the proposed Law introduced a substantive amendment to the corresponding articles of the current Law.

• The current Law identifies the persons entitled to a pension by reference to the persons whom the principal person supports and who require the continuation of such support after his death. In this respect, the Law follows the approach adopted by all pension laws. At the same time, however, it provides that the pension is to be distributed according to inheritance rules. Thus, in regulating this matter, the current Law simultaneously adopts two systems differing in purpose and basis, namely: _

• The pension system and the inheritance system. This has resulted in countless practical difficulties and has, in most cases, frustrated the purposes of the Pension Law. These results were inevitable once it became clear that not all beneficiaries are heirs and that some heirs are not beneficiaries. To clarify this point, the beneficiaries under the Law are those surviving the pension holder at the time of his death, namely, wives, children, parents and siblings. Thus, where a pension holder dies leaving a son who has exceeded the age of twenty-one and sisters, the current Law is applied to deprive the sisters of the pension because they have no inheritance share in the presence of the son, while at the same time the son is deprived because he has exceeded the age of twenty-one. Likewise, where a pension holder dies leaving his mother and his married daughter, the mother receives one-sixth because she is excluded from receiving one-third by the daughter, while the daughter is simultaneously deprived of the pension because she is married.

• There is no doubt that the drafter of the current Law did not anticipate these actual consequences of its provisions and the resulting conflict with the purposes and objectives of the Law. One of the unsatisfactory consequences of this arrangement, and perhaps one of its causes, was the prevalence of the misconception that a pension is an inheritance or has the character of an inheritance, although this is farthest from reality. The amounts paid to beneficiaries are rights originally established for them under the Law, and their establishment is based on pension principles; they are not an inheritance passing from the pension holder to them. It was therefore necessary for the proposed Law to avoid this situation and reorganize entitlement arising from the pension holder in a manner consistent with the fundamental purposes of the Law, while adhering to the intended rationale of securing the persons whom the pension holder supported during his lifetime by ensuring that, upon his death, they do not lose the income they require.

• Accordingly, Article (25), in specifying the beneficiaries of a pension holder, provides that they are the wife, husband, father, mother, son, daughter, the son or daughter of a son who died during the lifetime of the pension holder, brother, sister, grandfather and grandmother.

• Except in the case of the wife, son and daughter, it requires that the remaining persons have been dependent on the pension holder for their support at the time of his death.

• Article (24) also regulates the distribution of entitlement among them in accordance with the concept referred to above, namely, securing their support. It provides that the entire pension due to a deceased employee or pension holder shall be paid to the beneficiaries, except where there are two beneficiaries, in which case three-quarters of the pension shall be paid, or where there is one beneficiary, in which case one-half shall be paid. This differs from the provision of the current Law, which provides for payment of three-quarters of the pension to the beneficiaries regardless of their number.

• It further provides that distribution among the beneficiaries shall be made equally, regardless of their gender or their respective degrees of kinship, because these differences have no bearing on their need for support, which, as stated above, is the criterion recognized in the entitlement provisions.

• Article (30) of the proposed Law provides that, if one of the beneficiaries ceases to satisfy the entitlement condition, the aggregate pensions of the beneficiaries shall be reduced only by his share. However, the aggregate of the remaining pensions may not be less than half of the original pension. If it falls below that amount because the pension of one of the beneficiaries is suspended or terminated, an amount equal to half of the pension shall be redistributed among the remaining beneficiaries, regardless of their number. Article (26) of the proposed Law corresponds to Article (30) of the current Law and provides for raising the maximum age of male children and siblings eligible for the pension to twenty-six years instead of twenty-four, as under the current Law. Article (27) of the proposed Law corresponds to Article (31) of the current Law and expressly provides that the criterion for suspending entitlement on account of marriage is the marriage contract. It thereby resolves a matter that was disputed under the current Law. The rationale for adopting the contract as the criterion instead of consummation is the difficulty of proving consummation and the ease of proving the contract, as well as the fact that, in most cases, the contract is followed by consummation.

• Article (28) of the proposed Law corresponds to Article (32) of the current Law and expressly provides that employment in the Government constitutes grounds for terminating the pension, whether such employment is concurrent with or subsequent to the death of the pension holder. This matter was disputed under the wording of the current Law. The proposed Law added an exceptional provision permitting the combination of a pension and income from Government employment where their aggregate does not exceed (400) riyals.

• Article (29) of the proposed Law corresponds to Article (33) of the current Law and provides for the permissibility of combining two pensions where their aggregate does not exceed (300) riyals. The current Law prohibits combining more than one pension where their aggregate exceeds 140 riyals.

• Article (31) of the proposed Law regulates cases in which a pension holder returns to service. Unlike the current Law, the proposed Law does not distinguish between a pension holder subject to the provisions of the Pension Law issued in 1364 AH and one subject to the provisions of other laws. The basis for this distinction under the current Law was that a pension established under the provisions of the Law issued in 1364 AH should be borne by the Ministry of Finance and Economy or the General Panel, as the case may be, rather than by the Pension Fund. The proposed Law disregarded this matter, taking into account that cases involving the return to service of a pension holder subject to the provisions of the Law issued in 1364 AH had become so rare that they did not warrant a special provision. It goes without saying that persons who were reinstated in service under the current Law remain subject to its provisions, except that the pension due to them under the current Law shall continue in accordance with its provisions. The proposed Law introduced a new provision concerning persons who joined the civil service after having obtained pensions that became due pursuant to laws other than the Civil Pension Laws. It provides that, upon termination of their civil service, their pension for that service shall be governed by the Civil Pension Law and paid to them in addition to their previous pension, which shall be borne by the Pension Fund responsible for that pension.

• One of the significant and prominent matters in which the proposed Law amended the current Law is that it no longer distinguishes between two types of civil employees, namely, employees inside and outside the establishment, or between employees and workers. Instead, it subjects all of them to uniform rules. With respect to workers, or those referred to in the previous laws as employees outside the establishment, and because the Fund must receive consideration for its new obligations toward them, while their low salaries do not enable them to bear this consideration, the Law provides that the Ministry of Finance and National Economy shall bear this consideration on their behalf. The aforementioned amendment was necessitated by the fact revealed through the application of the current Law that its provisions were insufficient to fulfill the fundamental purpose of the Law, namely, achieving the maximum possible level of security for the employee and his dependants against the economic needs arising from the employee’s loss of income upon termination of his service.

• Under the current Law, an employee outside the establishment or a worker generally received a pension that did not reach the minimum level of adequacy, because of the low salary on which the pension was calculated and the limited benefits prescribed by the Law for such worker in comparison with those prescribed by the Law for an employee subject to the General Employees Law.

• The factor that caused this situation was the actuarial financial-balance factor of the Fund. The pension contributions received by the Fund from an employee outside the establishment or a worker were either three percent (3%) of his salary or nothing, as the case might be, and it was not possible to increase this percentage because of the low salaries of this category of employees. This situation changed following the amendment of the workers’ salary scale, and the worker’s salary became sufficient to permit the deduction of pension contributions at the rate applicable to an employee subject to the General Employees Law.

• Accordingly, the proposed Law repealed the rules governed by Articles (37), (38), (39), (40), (41), (42), (43) and (45) of the current Law.

• The proposed Law subsequently introduced rules establishing the criteria for determining age, the date on which entitlement to a pension commences, the grounds for deprivation of a pension, and the manner of attachment of a pension. These matters were not addressed by the current Law, although decisions concerning some of them had been issued by the Council of Ministers.

Release Date:	1393-07-26
Release Tool:	Royal Decree
Issuance Instrument Number:	m/41

Explanatory Memorandum for the Civil Pension Law