admin
But that statement is also totally irrelevant.
NSSA appears to have the legal right to make fundamental changes that significantly affect the entire insurance and pensions industry and slash the take home pay of workers by up to six percent.
But that does not mean that it is wise to make such changes without wide-ranging debate.
The authority, with the approval of the minister, has made two major changes.
The first, and the less dramatic, was to raise the contribution rate on the insured portion of basic salaries from 6 percent to 8 percent, split evenly between employers and employees.
If that was the only change the effect would have been limited to employers finding an extra US$2 for each worker and most workers seeing an extra US$2 deducted from their monthly pay.
There would be grumbling over this actuarial change but the effects would be minor.
NSSA would be expected to provide a far better and more comprehensive set of reasons than we have seen so far for this change, but it would not have raised the storm already breaking and which is certain to reach far worse levels as people receive their January pay.
For it is the second change that is so revolutionary.
NSSA has quintupled the insured level from US$200 to US$1 000 a month, raising the maximum monthly payment to the authority from US$6 to US$80 a worker, again split between employer and employee.
For a start this sees workers having to have an extra US$34 a month cut from their take-home pay.
Secondly, with employers having to find the same extra sum each month, it will be a lot harder for workers to win the cost of living increments they need.
Inflation might be very low, but everyone needs to see their take-home pay rise by around 5 percent a year just to stay where they are.
So the immediate effect of the NSSA change is that workers not only may not get that raise, but will actually see take-home pay fall by a similar percentage, once tax effects are taken into account.
The longer lasting results centre on the actual role of NSSA within the pension industry and the relationship between NSSA pensions and the occupational pensions most workers are entitled to.
When the NSSA pension was launched just over 17 years ago it was seen as a safety net, providing a rock-bottom basic pension that would keep the previously uninsured person from dying of starvation and would provide useful pocket money at a low price for those on occupational pensions.
Now NSSA appears to have changed the whole game.
There have been mutterings in the past that NSSA would like to take over the whole pension industry, but these were seen as a gross over-reaction by those who might lose out.
Now it is clear that this is precisely what NSSA intends.
Yet compared to the occupational pension schemes NSSA rates quite badly.
For a start most occupational schemes are now defined contribution, rather than defined benefit, so a worker can easily at any point just check how much they will have on retirement.
Most importantly, occupational schemes allow a retiring worker to take out one third of their accumulated share of the fund in cash, and for most that is tax-free.
This has allowed many to set up a modest business so they can still remain active after losing their jobs, and at the same time insure themselves against inflation, and has allowed others to sort out their accommodation for their old age.
Many in fact have managed to cope with fixed income and rising prices simply by renting out a room.
The NSSA pension scheme has no such commutation, just a pension fixed by the authority that will not increase during the remaining life span of the pensioner, although minimum pensions may rise.
Even with inflation at 5 percent a year someone in their 80s will be very badly off under that NSSA scheme, regardless of what they start with.
So perhaps the NSSA scheme, as presently constituted, is not that wonderful, yet it is expensive and many workers will be wondering if they can afford NSSA and an occupational scheme.
All this is besides the effect the changes will have on the entire insurance and pensions sector, the present main way of mobilising Zimbabwe’s savings and the main source of investment capital.
We strongly believe that NSSA and the Minister should not have smuggled in such revolutionary changes using a section of their Act that seems was put in by Parliament to accommodate minor changes.
This is not just normal bureaucratic empire building; it goes far, far beyond that.
Such a revolutionary change that significantly affects every worker, except domestic workers, and which has ramifications over the whole economy should have first been extensively debated.
We do not think the change is a good one, but we may be wrong.
Perhaps NSSA’s ideas are the best.
But Zimbabwe should have been allowed to debate this, not just have it imposed.
Online Reporter