Employment law
Pension: Early pension with reduction
Year-end closing at Datasoft Mali, 10 p.m. Mariam, the chief accountant, closes her last binder and tells the director that she will stop at the end of the year: she is 53 and has “her thirteen years of contributions”. She is right about the entitlement. She does not know the price: a reduced pension, for good.
Datasoft Mali and the people mentioned in this article are fictitious: they are used as examples only.
1. What exactly are we talking about?
Datasoft Mali employs 40 people in Bamako. Mariam has worked there for thirteen years; she had never contributed before. She therefore has 156 months of insurance with the National Social Security Institute (INPS).
The liquidation of a pension is the point at which the INPS sets the amount of the entitlement and starts paying it. An early pension is a pension liquidated before the normal liquidation age, set at 58. The reduction is the cut applied to this pension in return for leaving earlier.
The Social Security Code sets three levels (Social Security Code, article 144):
| Age at liquidation | Effect on the pension |
|---|---|
| Between 53 and 55 | Reduction of 5% per year of anticipation |
| From age 55 | Early pension without reduction |
| 58 | Normal liquidation age |
| From 53, insured person medically recognised as unfit for work | Without reduction (article 145) |
In all cases, at least thirteen years of salaried employment giving rise to contributions are required, and the person must have reached 53 (Social Security Code, article 143).
Why a reduction? A pension liquidated earlier will be paid for longer, on contributions that stopped earlier. The reduction restores the balance of the scheme.
The most common mistake
Believing that the early pension allows people to leave with less than thirteen years of insurance. Anticipation concerns age, never the contribution period. With less than thirteen years, only the old-age allowance is possible, from six years of insurance (article 147).
Bringing age forward, yes. Bringing the contribution period forward, never: thirteen years remain thirteen years.
2. The calculation, step by step
The pension is first calculated at the full rate: 2% of average monthly remuneration over the last eight years per year of insurance, i.e. 26% for thirteen years (article 156). The reduction is then applied to that amount, as a percentage.
The INPS counts the years of anticipation up to 55, the age from which the reduction disappears: two years at 53, one year at 54. Section 5 comes back to this point.
Example. Over her last eight years, Mariam earned XOF 28,800,000 in wages subject to contributions.
Average monthly remuneration: 28,800,000 ÷ 96 = XOF 300,000
Full-rate pension: 300,000 × 26% = XOF 78,000 per month
Leaving at 53, 2 years of anticipation: 78,000 × (1 − 10%) = XOF 70,200 per month
Leaving at 54, 1 year of anticipation: 78,000 × (1 − 5%) = XOF 74,100 per month
Leaving at 55: XOF 78,000 per month, without reduction
What leaving at 53 costs
The Code does not provide for removing the reduction once the pension has been liquidated. The loss is therefore repeated every month.
Monthly loss at 53: 78,000 − 70,200 = XOF 7,800
Loss over one year: 7,800 × 12 = XOF 93,600
Loss over ten years of retirement: 93,600 × 10 = XOF 936,000
Two years earlier means 10% less, every month, for the whole of retirement.
What you need to do
- Check on the INPS statement that the employee has thirteen years of insurance before they set their leaving date.
- Calculate in writing the pension at 53, 54 and 55 and give this table to the employee.
- Refer the employee to the INPS for an official simulation before any resignation.
3. On the employment contract side: retirement or resignation?
The Labour Code sets the retirement age in the private sector at 58 for categories B, C, D and E, and at 60 for category A (article L.60). It allows employees to request the liquidation of their pension from 55, or 57 for category A, and states that such a departure, at their initiative, does not constitute a resignation (Labour Code, article L.60 bis).
Before these ages, nothing treats the departure as retirement from the contract’s point of view. Mariam, who is leaving at 53, must therefore notify her decision in writing and work her notice period, as for a resignation (articles L.40 and L.41).
The retirement payment
An employee who permanently stops working to start receiving their retirement pension receives a retirement payment, calculated like severance pay (Labour Code, article L.55). The text makes no distinction according to the age of liquidation.
Example. Mariam has thirteen years of service and an average monthly salary of XOF 300,000 over her last twelve months.
Years 1 to 5: 5 × 20% = 100%
Years 6 to 10: 5 × 25% = 125%
Years 11 to 13: 3 × 30% = 90%
Payment: 300,000 × 315% = XOF 945,000
What you need to do
- Require a written letter and apply the notice period if the employee leaves before 55, or 57 in category A.
- Calculate the retirement payment using the scale in article L.53.
- Issue the certificate of employment and the proof of cessation of work required by the INPS on departure.
4. Formalities with the INPS
The liquidation application is sent to the INPS by the employee or by their last employer, who forwards it within a period not exceeding six months. It must be accompanied by proof that work has stopped and an undertaking not to resume salaried activity (Social Security Code, article 155). For a departure with a reduction, the INPS also requires a handwritten request for early retirement, in which the insured person clearly states their wish to leave before the normal age.
The early pension takes effect on the first day of the calendar month following the end of work, if the application reaches the INPS within six months. After that, it only takes effect on the first day of the month following receipt of the application (Social Security Code, article 146).
For an insured person medically recognised as unfit for work, the age of 58 is lowered to 53 without reduction (article 145). The INPS asks for a medical certificate stating that the person cannot carry out any professional activity, issued by the treating doctor and confirmed by the INPS medical adviser. In the event of a dispute, unfitness is assessed by a committee chaired by a doctor appointed by the minister in charge of health, with a representative of the minister in charge of labour, an INPS doctor and a representative of employers and of workers (article 237).
What you need to do
- Send the pension application to the INPS within six months of departure, with the handwritten request for early retirement.
- Tell the employee that they are undertaking not to resume salaried activity.
- Refer an ill employee to the unfitness procedure, which removes the reduction.
5. A closer look: how the INPS counts the “year of anticipation”
Article 144 sets a reduction of 5% “per year of anticipation”, without specifying the reference age. The INPS counts the years remaining before 55, and applies the reduction as a percentage of the pension. Its own example confirms this: at 53, a pension of XOF 33,517 is reduced to XOF 30,165, i.e. 10% less.
| Leaving age | Years of anticipation | Reduction |
|---|---|---|
| 53 | 2 | 10% |
| 54 | 1 | 5% |
| 55 and over | 0 | None |
The mistake to avoid: counting up to 58. It announces a 25% reduction at 53 instead of 10%, and may wrongly put an employee off leaving. For a departure at 53 or 54, still ask the INPS for a written simulation. See also our article Old-age pension.
Key takeaways in 6 points
- Check both conditions: age 53 and at least thirteen years of insurance.
- Apply a reduction of 5% per year remaining before 55: 10% at 53, 5% at 54, none after that.
- Calculate the monthly loss and repeat it over the length of retirement: the reduction does not go away.
- Refer an ill employee to the unfitness procedure: it allows departure at 53 without reduction.
- Treat a departure before 55, or 57 in category A, as a resignation: written letter and notice period.
- Send the application to the INPS within six months of departure so as not to lose any month of pension.