adminIt also highlighted the fact that Zimbabwe’s social security scheme only began just over 17 years ago.
It has reached the stage where the maximum insurable income replacement rate of a pensioner’s pension is about 22,6 percent of insurable earnings.
That is the replacement rate for someone who has contributed to the scheme for 17 years, whereas the replacement rate after 40 years is 63,3 percent and after 47 years is 79,7 percent.
Most of the pensioners currently drawing pensions contributed to the scheme for less than 17 years.
Since there is a minimum contribution period of 120 months to be eligible for a monthly pension, those who retired within the first 10 years of the scheme received a once-off retirement grant rather than a pension.
However, those who were still young when they began working and contributing to the national pension scheme can be expected, provided they continue to contribute to the scheme, to have earned a reasonable pension by the time they reach the retirement age of 60, or, for those able to continue working for another five years, 65.
This is the norm in other countries with longer established social security schemes. It should eventually become the norm in Zimbabwe too, since contributions are compulsory for all those in formal employment, other than domestic workers, and should continue no matter where one is employed, provided it is within the formal sector.
Theoretically, although those retiring while the scheme is still to achieve maturity may not receive as good a pension as everyone would wish, the younger generation who still have a long way to go to retirement should receive a reasonable pension when they reach 60 or 65 years of age.
However, thousands of people are employed in the informal sector, which is excluded from the national pension scheme.
Many young people who begin work in the formal sector, where NSSA contributions are deducted monthly from their wages, at some stage move over to the informal sector.
This is either because they have been dismissed or retrenched, or because they believe they can make more money in the informal sector or because they are recruited by a relative or friend in the informal sector.
Others have begun work in the informal sector at a young age but leave their jobs in search of greener pastures in other countries. As a result their NSSA contributions cease and so does the prospect of their receiving a decent social security pension in their old age.
It is important, therefore, for those who begin contributing to their social security pension when they are young to continue doing so.
If they change jobs, they should ask their new employer for the requisite NSSA form on which to advise NSSA of their change in employment.
If money is not deducted from their salary, they should ask why and ensure the new employer does make the necessary deduction.
Those who are retrenched or leave formal employment for various reasons can arrange with NSSA to continue with their contributions, though they will have to pay the employer’s contribution as well as their own
and will be responsible for ensuring payment is made each month.
If they start their own business and register it as a company, they should register with NSSA and ensure contributions for all employees, including themselves, are remitted to NSSA.
It is necessary to contribute for at least 120 months to be eligible for a monthly pension on retirement. It is important to contribute for as long a period as possible, preferably for the whole of one’s working life to obtain the best possible pension on retirement.
Unfortunately those who are young often fail to appreciate the importance of an old age pension.
Old age seems so far away that it is not something young people tend to think much about. Yet it is those who start contributing to their pension when they are young and continue to contribute throughout their lives until their retirement, who will reap the most benefits from their pension contributions.
As people become older and closer to retirement age, they become more aware of the importance of a pension in their old age. However, if they have not been contributing continuously from their youth, it is then
too late for them to build up the contribution record they need in order to receive a worthwhile pension.
Talking Social Security is published weekly by the National Social Security Authority as a public service. Readers can e-mail issues they would like dealt with in this column to [email protected] or text them to 0735 041 278. Those with individual queries should contact their local NSSA office or telephone NSSA on (04) 706517-8 or 706523-5.
Online Reporter