Budget 2026-2027: how the new State Age Pension will work

From 1 January 2027, the Basic Retirement Pension (BRP) will be replaced by a new scheme called the State Age Pension (SAP). This reform appears in the annexes to the 2026-2027 Budget presented Friday by the Prime Minister and Minister of Finance, Navin Ramgoolam.

End of gradual increase in pension age to 65

The budget annexes also specify that the reform introduced last year, which planned to gradually raise the age of eligibility for the old age pension from 60 to 65 years, will be abandoned from December 31, 2026.

However, the transitional provisions already planned for people reaching the age of 60 between September 1, 2026 and August 31, 2029 will remain in force under the new regime.

Eligible people will be able to choose when to receive their pension

According to the budgetary annexes, an eligible person can choose to start receiving their pension at any time between the ages of 60 and 70. This choice will be final.

A person who decides to receive their pension before age 65 will receive a reduced pension. The appendices specify that the reduction will be 0.5% per month, or 6% per year, for each year of anticipation before the age of 65.

Conversely, a person who chooses to defer payment of their pension after age 65 will benefit from an increase of 0.75% per month, or 9% per year, for each year of deferral.

An example given in the appendices

The Budget annexes give the example of a person reaching the age of 60 on September 1, 2026.

This person would normally become eligible for a pension of Rs 15,555 at the age of 62, i.e. September 1, 2028. If, however, they choose to start receiving their pension from January 1, 2027, i.e. 20 months earlier, the amount of their pension would be reduced to Rs 14,000, before the application of the income-taking mechanism.

Income will now be taken into consideration

In his budget speech, the Prime Minister announced the introduction of a mechanism taking into account the income of beneficiaries.

Thus, people whose monthly taxable income is less than Rs 14,000 will receive the full pension.

For people whose income exceeds this threshold, the amount of the pension will gradually decrease according to a gradual reduction mechanism.

According to the budget speech, people aged over 60 whose taxable income does not exceed Rs 50,000 per month may nevertheless be eligible for the State Age Pension, whether they are still working or not. The minimum amount provided is Rs 1,000.

CSG services will be integrated

The annexes also specify that the retirement benefits currently paid under the CSG will be integrated into the new regime.

Thus, the additional allowance of Rs 1,000 paid from the age of 65 as well as that of Rs 1,500 granted from the age of 75 will be absorbed into the State Age Pension.

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