admininsurable earnings ceiling and the prescribed pension contribution rate to improve payouts for pensioners.
This comes amid concerns that NSSA’s monthly payout to pensioners, currently pegged at US$40, was too little to address their obligations.
But the social security authority argues that inflows from contributions by workers were not enough to sustain an upward review of pensioners monthly benefits.
Moreover fears abound that the authority might have to tap into and exhaust its reserves if it adjusted payouts without first addressing inflows into its coffers.
Before the introduction of the insurable earnings limit, pensioners contributed in proportion to their gross income, entitling them to more benefits on retirement.
NSSA general manager Mr James Matiza said it was critical that either the insurable earnings limit or the contribution rate be reviewed to enhance payouts.
“Raising the insurable limit will only increase payout for the pensioner as more will come into the institution and a similar amount will also be paid out,” he said.
And he pointed out adjusting the contribution rate would help close the unfunded gap by allowing more collections and less but improved pension payout for retirees.
The current minimum monthly NSSA retirement pension payout of US$40 came under the spotlight at a meeting of NSSA officials and the Zimbabwe Congress of Trade Unions, the Zimbabwe Federation of Trade Unions and the Apex Council, which represents civil servants.
During the meeting, there was general agreement by participants that US$40 was not enough to meet the cost of living demands in the present economic environment.
Experts contend that the payout, although clearly inadequate, is most appropriate at the present moment in view of the low contribution level and the need to ensure that the pension fund is sustainable in the long term.
Actuary Ms Pelagia Kafesu explained the current contribution levels and the maintenance of adequate reserves to ensure the meaningful payment of future pension benefits.
She said pension payable was a function of a contributor’s pensionable salary, number of years of service and an accrual rate of 1,33 percent for the first 30 years of pensionable service and 2,33 percent thereafter.
“There is currently a maximum monthly insurable earnings ceiling of US$200, meaning those earning above US$200 paid the same contribution as those earning US$2 000 and the pensionable salary used for calculating their pension was US$200, if they retired while the US$200 ceiling was in place.
“The calculation for a person retiring now, therefore, who had contributed to the scheme since inception 17 years ago would be 1,33 percent of 200 multiplied by 17, which came to just over US$40,”
she said.
Mr Matiza said lifting the ceiling would result in pensioners accruing more over the period of employment, which would mean more payout on retirement.
He said, as a case in point, that a person earning US$1 000 a month would, if there was no insurable earnings ceiling, receive a pension of US$226 using the same formula. With the monthly insurable ceiling, it remains US$40.
But any upward review of the contribution levels would most likely be met with resistance by employers because higher contributions from employees typically mean higher contributions from employers at the same time, since they are required to pay the same amount as the employee.
Online Reporter