adminThe national pension scheme co-exists with any occupational or private pension scheme that employees may choose to contribute to, while in employment.
The same applies to Worker’s Compensation Insurance Fund pensions. The national pension scheme is for everyone that is formally employed.
Everyone in formal employment, other than those in domestic service, is obliged by law to contribute to the national pension scheme 3,5 percent of his or her monthly earnings, up to a maximum insurable income of US$700. The employer is required to contribute the same amount.
All contributors are entitled to a retirement pension, if they have contributed for 10 years or more or to a retirement grant if they have contributed for less than 10 years but at more than 12 months.
There is nothing that stops an employee from contributing to other pension schemes. Some companies expect employees or some in certain job categories to contribute to an occupational pension scheme in addition to contributing to the national pension scheme.
The amount payable to a national pension fund pensioner depends strictly on the pensioner’s contribution period and insurable income at retirement.
Whether the pensioner is contributing to other pensions from other sources does not matter as far as the NSSA pension scheme is concerned. That includes Worker’s Compensation Insurance Fund pensions. It would obviously be beneficial for a pensioner to have more than one pension as that increases disposable income on retirement.
However, occupational pension schemes tend to be tied to the person’s employment or to the company the employee is working for.
When the employee moves to another job he or she may be required to join another occupational fund. The individual then has to start a new contribution period with a new pension fund. The refunded contributions tend to run out quickly.
This is different from past experiences where employees spent the greater part of their working life working for one company or organisation, rising in seniority as their career was built within that organisation and eventually they would then enjoy the occupational pension fund pension when they retired.
However, that is now rare. Although there are still some people who built their careers within a single company or group of companies, there is a lot more mobility within the employment sector now than there used to be.
While at one time it was a sign of stability to spend years with one company, many people now move frequently from one company to another, often for new experiences or a better salary or new opportunities.
That generally means losing the opportunity of a retirement pension from the occupational pension fund one was contributing to and starting to build up a pension contributions record anew with a new occupational pension fund at the new job.
That, of course, is one of the advantages of the NSSA national pension scheme. It does not matter how many times you change jobs, your contribution record continues from one job to another.
Some people would like to receive their contributions payouts from the NSSA scheme in the same way they do in the case of occupational pension fund, when they change jobs.
However, that is rather short-sighted, because if that was to happen, they would be in the same position as they are with the occupational pension fund of having to build up a contributions record again from the start every time they change job.
As it is, one continues to build up one’s contribution record with the national pension scheme as they move from one job to another.
This is important because 120 months of contributions are needed if one is to be paid a national pension scheme pension once one retires at the normal retirement age.
Those who have contributed to the scheme for less than 120 months are eligible for a grant, which is a single lump sum payment, provided they have contributed for at least 12 months.
Those who have contributed for less than 12 months by the time they reach pensionable age simply refunded their contributions with interest.
There are only two alternative retirement benefits, either a pension, if one has contributed for 120 months or more, or a single lump sum grant. It is not possible, with the NSSA scheme, to receive both, as one correspondent seemed to think.
Those who qualify for a pension receive the pension for the rest of their lives. Those who have a second pension from an occupational pension fund or other pension fund and those who have managed to save a significant sum or to have invested sufficient to entitle them to reasonable interest from that investment will be fortunate.
Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme, PaMheponeNssa/Emoyeni le NSSA, discussing social security issues at 6.50 pm every Thursday on Radio Zimbabwe and every Friday on National FM. There is another social security programme on Star FM on Wednesdays at 5.30 pm. Readers can e-mail issues they would like dealt with in this column to [email protected] or text them to 0772-307913. Those with individual queries should contact their local NSSA office or telephone NSSA on (04) 706517-8 or 706523-5.
Online Reporter