adminrelating to the co-existence of the National Social Security Authority and private pension schemes.
The actuary will also make recommendations on the optimum level of contributions to NSSA’s national pension scheme in relation to benefits.
It is expected that the evaluation will have been completed by the end of this month and that a report will be submitted to the Government.
Commenting on the development NSSA general manager Mr James Matiza said the pension fund would continue to ensure that its methods of calculating pensions adhere to global set standards.
“We look to independent actuaries
for guidance on such matters and hope
that the recommendations of the international actuary currently undertaking an evaluation of our pension schemes will be accepted by Government and other stakeholders, no matter what those recommendations may be.
“People sometimes wonder why NSSA cannot pay higher pensions when it appears to have money to invest.
“They overlook the fact that it is essential for pension funds to invest contributions in order to grow them and make it possible to pay adequate pensions on an on-going basis, not only now but in the future.
“We are required to safeguard those contributions and invest them to make them grow, so that we can pay contributors an adequate pension when they retire.
“We have to stick to internationally accepted methods of calculating pensions based on contributions if we are to ensure that the interests not only of current
but future pensioners are protected,” he said.
The current ceiling on insurable earnings is US$200, meaning that pension payments are also low, since the formula used to calculate pensions takes into account the length of time a pensioner has contributed to the pension scheme and the pensioner’s insurable earnings at retirement.
NSSA’s highest paid pensioner is receiving US$1 447 per month, based on his contribution period and his insurable earnings when he retired.
He retired at a time when the contribution level was eight percent of one’s actual salary rather than, as at present, six percent of a maximum salary of US$200.
NSSA has been operating the pension scheme for 16 years and six months. According to the benefit formula, the monthly pension of a pensioner who joined the scheme at inception and retires now, while making contributions based on the maximum monthly insurable earnings of US$200, is US$44.
NSSA says while this amount may
seem low, it actually compares favourably with the pensions being paid by private occupational pension schemes, which have higher contribution levels than the NSSA scheme.
These calculate the contributions on the basis of an employee’s full salary, rather than on a maximum of US$200.
Mr Matiza recently told a NSSA strategic planning workshop that the average contribution rate for private occupational pension schemes was 22,5 percent of an employee’s gross salary. The minimum pension was US$25.
“We are only collecting six percent of US$200 and paying out a minimum pension of US$40,” he said.
The reduction in the contribution rate and the imposition of the US$200 insurable earnings ceiling came into effect in May last year.
NSSA is regularly provided with
actuarial advice on the contribution level required to ensure adequate benefits on retirement.
According to NSSA, it was on actuarial advice that the contribution rate was adjusted from six percent to eight percent of a person’s salary with effect from January 2009.
It was also on actuarial advice that minimum pensions were raised this year from US$25 to US$40.
However, the return last year to a six percent contribution rate and the imposition of an earnings ceiling of US$200 for the purposes of NSSA pension contributions was a Government decision.
Observers contend that the intention appears to have been to increase employees’ and employers’ disposable income and
offer some protection to occupational pension schemes, which have always been concerned about the effect of a compulsory pension scheme on voluntary pension schemes.
The ILO agreed to provide an international actuary at its own expense. On current pension levels Mr Matiza said NSSA appreciated that the current pension levels,
even though they might be better than those of private schemes, were inadequate, particularly for those living in urban
areas, especially if they have no other pension or savings to complement their NSSA pension.
“We would dearly love to raise pension levels but can only do so if contribution rates are sufficient to sustain such levels in respect of present and future pensions,” he said.
Online Reporter