adminthe pensioner’s insurable earnings at retirement and pension contribution period.
“The US$40 pension so often quoted in the Press is only the minimum pension being paid,” NSSA general manager Mr James Matiza said.
“It is paid to those whose entitlement, based on their contributions period and insurable earnings, would be less than this amount had NSSA not set US$40 as the minimum pension payment,” he said.
He was commenting on a New Ziana report carried in Herald Business on Tuesday that alleged that NSSA pension payouts were among the lowest in the region.
To support its claim, the New Ziana report compared the US$40 a month, which it said was what NSSA paid, to the monthly payments made to elderly people in South Africa. It said this ranged from US$142,80 to US$145.31, and Namibia, where it said payments ranged from US$50,26 to US$62,85.
Mr Matiza pointed out that neither South Africa nor Namibia at present has a contributory social security pension scheme.
In South Africa, the government paid a grant to those over the age of 60 whose financial situation was below a certain level. A means test was applied to determine an individual’s eligibility for the grant. Namibia also paid grants.
The social security pension in Zimbabwe was a contributory pension scheme. Only those who contributed qualified for a retirement benefit. If they had contributed for 120 months or more they qualified for a pension. If they contributed for less than that period but more than 12 months they received a lump sum retirement grant, Mr Matiza said.
The amount of the pension paid was determined by a formula that took into account the individual’s contribution period and insurable earnings on retirement. The pension scheme was designed to pay a pension equivalent to a percentage of the individual’s insurable earnings on retirement that was related to the length of time that contributions had been made.
He said the scheme was about 17 years old. For those who had contributed to the scheme for 17 years the insurable income replacement rate was 22,5 percent. As the scheme matured and contribution periods increased the maximum replacement rate would increase.
However, because the maximum insurable earnings level was at present US$200 rather than actual income, those earning more than US$200 retiring now after contributing for 17 years received a pension equivalent to 22,5 percent of US$200. This amounted to about US$45, rather than 22,5 percent of their actual income.
Those receiving higher amounts than this, in some cases hundreds of dollars, had retired in 2009 or early 2010 when there was no insurable earnings ceiling and they were earning above US$200.
The contribution rate then was 4 percent of basic salary paid by the employee and four percent by the employer.
Their actual salary, therefore, constituted their insurable earnings.
Mr Matiza pointed out that the most any employee was paying in pension contributions at the moment was US$6 per month, which was matched by a further US$6 from the employer.
“We are receiving no more than US$12 per employee per month and yet we are paying out monthly pensions of between US$40 and US$1 477 per month,” he said.
“The formula we are using, which is the number of contribution years multiplied by the individual’s monthly insurable earnings multiplied by a factor of 1,333 percent, is what determines the pension level.
“Where this results in a figure of below US$40, we pay the pensioner US$40, since we have set this as the minimum pension level.
“We realise this is not a lot but it is the best we can do with current contribution levels, bearing in mind that we have to invest current contributions to ensure that there will be funds to pay those presently in employment when they retire.
“It is easy for a journalist to quote unnamed analysts as contending that NSSA could increase pensions with the revenue it generates from investments.
“We rely on the advice of actuaries, who are professional analysts skilled in making future financial projections. They are the experts and best equipped to advise on what NSSA can afford to pay in benefits, after taking into consideration contributions, investments and investment revenue.
“They also advise on the contribution levels needed to sustain optimum benefit levels.
“Pension levels have to be related to contribution levels. If contribution levels and insurable earnings levels increase, then pension levels can be expected to increase as well,” he said.
Online Reporter