adminThe rise in pension contribution rates from three percent to four percent of the insured portion of a salary, and the rise in the insured limit from $200 a month to $1 000 a month will see maximum NSSA contributions rocket from $12 a month to $80 a month, the sums split equally between employees and employers but the self-employed paying the lot.
Most of those hit by the new payments are also beneficiaries of private pension schemes and so most will not benefit from tax concessions for increased pension fund contributions to NSSA and will see their take-home pay cut by as much as $34 a month, as well as having their next pay rise cut or deferred as employers battle to find the extra sums they are being forced to pay.
The new rates and limits were promulgated in Statutory Instrument 145 of 2011 without any debate with individuals and employers, who are required to pay the new sums.
Mr Tawanda Chituku, a member of the Actuarial Society of Zimbabwe, said high-level consultations were being held to see if the statutory instrument can be repealed.
“Consultations at this stage are taking place at a high level with the Insurance and Pensions Commission, Zimbabwe Association of Pension Funds as well as both the Ministry of Labour and Finance for this ill-thought out statutory instrument to be immediately repealed,” Mr Chituku said.
The pension fund industry is criticising the reforms, saying they were made without consultations and proper consideration of the implications.
“As an industry, we are concerned that such drastic changes were formally gazetted without the due consultation process and we will keep you updated on developments on this issue as they unfold,” said Mr Chituku said.
However, NSSA spokesperson Phil Chereni said the review was done according to law.
“The NSSA Act, which is managed by the Minister of Labour and Social Services, was very clear in terms of how contribution rates and ceilings were reviewed, particularly Section 26 of the Act.
“In short, that’s what the NSSA Act says and everything was done according to the law,” Mr Chereni said.
He said Section 26 states that NSSA shall appoint an actuary approved by the Minister to review and evaluate actuarially every scheme, including the rates of contributions payable thereunder.
“So what it means is an actuarial report produced by the actuaries made such recommendations which NSSA management acted upon by submitting it to the NSSA Board which also approved such recommendations before sending them to the relevant Minister for gazetting into law,” Mr Chereni said.
According to an insider in the pension fund industry, the unilateral review of contributions by NSSA clearly has not been thought through, thus ignoring enormous and far-reaching implications for the affected employees and employers, the survival of the occupational pension fund industry in Zimbabwe.
The insider also claimed that the capacity of the economy to generate the much needed domestic savings from occupational pension funds and the Zimbabwe Stock Exchange and capital markets in Zimbabwe in general, primarily fuelled by private occupational pension fund investment, would also be affected.
Banks would not be able to generate as much liquidity from private occupational pension funds for on-lending to the productive sector, it is feared.
On Government, the insider said, the implication of this instrument 145 of 2011, is that it would be required to pay four percent of the salary bill to NSSA, the additional cost of which is clearly not budgeted for.
NSSA is raising the minimum pension from $40 to $60 also from this month, but those earning at least $1 000 a month and retiring at the end of this month could see their pension jump to $230, although they will
have only paid for one month at the new rates and limits.
Since the new benefits become available immediately to new pensioners, regardless of what that person has paid up to now, those who retire in the next year or two will get back far more than the new increases, and will benefit far more than young people just starting out in employment now. And they will benefit far more than those who retired on 31 December last year on the same salary who get just under a fifth as much.
Pension fund experts reckon NSSA could raise the minimum pensions from income from its investments it has made in both listed and unlisted stocks.
Online Reporter