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The average future value of salaries is used instead of the last salary drawn subject to the new retirement system because the average future value is more fairer and equitable between categories in terms of retirement pension calculation as the pension is associated with the paid contributions:

  • Regarding contributors whose salaries increase at a rate quicker than the average rate due to salary increments during the last years (as a result of system manipulation, exceptional promotions or temporary jobs). In the last salary systems, the contributions paid are not fair for almost the entire period of service and the cost is charged to the calculated pensions for the rest of the categories. This is achieved through increasing their contributions.
  • Regarding contributors whose salaries increase in rate less than the average due to salary reduction during certain years as a result of layoffs or reduction in pay due to restructuring, this system safeguards the rights of the contributor during the years in which he paid sufficient contributions contrary to the last salary systems.
  • The insured persons with salaries increasing at rates closer to the average salary increment, the average future value for their salaries equals the last salary/wage and; therefore, makes no difference in the retirement pension. 

Further, the average future value of salaries enables the system to accommodate categories currently not covered under the pension schemes such as temporary workers, self-employed, and seasonal workers with no fixed income.  Such categories cannot be covered in systems that use the last salary formula and as such will be deprived of the retirement pension in the future. The last salary systems do not allow the collection of salaries from more than one employer of the insured person but the new system allows such a scenario.