Payment for retirement benefit

The earliest date at which a contributor to the national pension scheme can claim his/her retirement benefit is 60, unless he/she qualifies for the early retirement age of 55 on the grounds of having been employed in an arduous occupation.

However, in both cases the contributor must have retired in order to be eligible for payment of the retirement benefit. Only when one reaches the age of 65 is it possible to successfully claim the retirement benefit while still in employment.

The early retirement age of 55 is applicable to those who retire at that age after having worked for at least seven of the preceding 10 years in an occupation classified by NSSA as arduous, such as agricultural work, heavy truck driving, quarrying and some mining and forestry jobs.

Somebody sent an e-mail asking whether it was possible to claim one’s pension at the age of 60 even though one was still working due to the fact that the normal retirement age at the company was 65.

The normal retirement age for different occupations or at different organisations has nothing to do with the ages at which a national pension scheme retirement benefit is payable. Several people have enquired whether they could receive the retirement benefit because they had retired at age 55, which in their particular occupation was the normal retirement age.

The answer is that they cannot, unless they were engaged in a job classified by NSSA as an arduous occupation for at least seven of the preceding 10 years.

The payment of retirement benefits requires those claiming the benefit to be retired, in other words no longer working, unless they have reached the age of 65.

If a person is still able and willing to work, the delay until they do retire or turn 65 is actually beneficial. That is because the longer they work and the higher their insurable earnings on retirement, the higher their benefit will be.

A minimum of 120 months of contributions is required to be eligible for a pension from NSSA when one retires or turns 65. Those who have contributed for less than a full 10 years receive a grant instead of a pension. The formula that is used to calculate a retirement pension takes into account the contribution period and insurable earnings at retirement.

The longer one contributes to the scheme for and the higher one’s insurable earnings the higher one’s pension will be. At present there is a maximum monthly insurable earnings limit of $700. It increased to this level from the previous limit of $200 in June last year.

A person aged 60 at the moment who continues working and contributing to the national pension scheme operated by NSSA until the age of 65 adds another five years to his/her contribution period.

Moreover, if he or she is earning above $700 per month there is always the possibility that within that five year period the maximum insurable earnings level may have increased. If a person earning above $700 a month was to retire now, the pension would be calculated using insurable earnings of $700.

If in another five years that figure has increased, the person would receive a pension based on both a longer contribution period and higher insurable earnings.

Of course, whether there will be such an increase in the insurable earnings limit within the next five years nobody knows.

However, there must be many people earning significantly more than $200 who retired prior to June 2013, when the maximum insurable earnings level was only $200, who must have wished they had delayed their retirement to beyond that date. Had they been able to do so, many of them would be receiving a higher pension than they are receiving now.

There is a lot to be said, therefore, for delaying one’s retirement until age 65, if one is able to do so.

Many might still want to carry on working beyond the age of 65 but unfortunately doing so will not increase their pension beyond what they are entitled to at that age.

That is because the NSSA pension scheme stipulates that contributions to the national pension scheme can only continue until the contributor reaches the age of 65.

Any contributions made after that age are deemed to be contributions made in error. They are refundable. They cannot be included in the pensioner’s contribution period for the purpose of calculating the pension.

The same is true where calculation of a retirement grant, for those who have contributed to the pension scheme for less than 10 years, is concerned.

Those who reach the age of 60 and continue working and contributing to the national pension scheme, therefore, should not be disappointed that they cannot yet receive their retirement benefit, as the delay is likely to be beneficial to them because it may well mean a higher benefit.

Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme on social security, PaMheponeNssa/Emoyeni le NSSA, at 6.50 pm every Thursday on Radio Zimbabwe and Friday on National FM. 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) 706523/5, 706545/9, or 799030/1.