‘Social security has to be relevant’

The ongoing currency reforms, which began in October last year, have not been without their fair share of upheavals.

Experts say the insurance sector is often caught up in major macro-economic changes, which often occasion the revaluation of insurance investments.

Pensioners and policyholders suffer as a result. The National Social Security Authority (NSSA), which is mandated by an Act of Parliament to administer public schemes and funds, has also had to grapple with the erosion of pension values.

The Sunday Mail’s Gender and Community Affairs Editor, Fatima Bulla, managed to speak to NSSA’s research and schemes planning manager Ms Tambudzai Jongwe on a wide range of issues affecting the industry.

*****

Q: Pensioners and policyholders continue to complain about the low pay-outs from NSSA. What is really the case?

A: We look at how much you have contributed to the scheme and your contribution period. One thing that has really hampered the contribution period is the number of retrenchments that have taken place over the years.

When a social security scheme (or) an old-age pension scheme is set up, we expect that a person will contribute for 40 years. But, the current situation in Zimbabwe, because of work stoppages and the retrenchments, you find that some people have contributed for five years, (and) they are retrenched; some have contributed for ten years and there is no continuous contribution for the 40 years. . .So, all these factors contribute towards the amount of benefit that is payable at the end of the year or at the point of claiming the benefit.

Q: There is a ceiling of $700 when calculating the benefit of a pensioner, no matter how much the member earns, whether as an executive or as a low-earning employee. What is the impact of having a ceiling and how is the calculation done?

A: If we look at the environment that we are in at the moment, we actually have quite a significant number of people who are earning above $700. So, if somebody is earning, let’s say, $10 000 and their insurability earning at the moment is $700, it means in terms of the replacement ratio, it will be based on the $700; not on the $10 000.

So, it means that at the point of retirement, their lifestyle will drastically change because the replacement income will fall short of what this person was earning.

The retirement contribution formula is 1,33 percent of contributor’s last salary at a maximum of $700, multiplied by contribution period in months.

For example, worker A worked from June 2002 to December 2013 earning $5 000, we say 0,0133 x 700 insurable earnings, multiplied by 11,5 contribution months, to give us $107.

If there is no ceiling, its 0, 0133 x 5 000 actual salary x 11,5 contribution period, to give us $764.

So, it is our hope that through the actuarial evaluation that is currently underway, they will also look at the possibility of increasing the contributing rate, as well as, maybe, increasing the maximum insurable earnings.

Or even removing the cap.

But, we stand guided by our actuaries in terms of how they will make the different recommendations in terms of benefit levels, contributing rates and the maximum insurable earnings.

Q: You said NSSA co-exists with other insurance schemes and people should have options, is there over-reliance on NSSA pay-outs at the point of retirement?

A: I would say yes. At the moment, most people are relying on the NSSA pension and that is why I said I need to re-emphasise the fact that NSSA co-exists with other social security players. It is designed in such a way that it will partially replace your income; it does not replace your income 100 percent.

So, by virtue of not replacing your income 100 percent, it means that we need other players to come in to augment whatever NSSA is currently paying at the moment. Hence, we are encouraging individuals to take that responsibility and engage or come up with their own savings or make subscriptions with different pension houses so that at retirement, they are not only looking at NSSA for their survival, but at other pension portfolios as well.

Q: You said NSSA is currently directing more resources to pay-outs than investment, what does this mean for supposed future beneficiaries?

A: Any social security scheme goes through a journey. At inception, you are still in your infancy; that is the time you are supposed to capitalise on your investments, because of all the money you are getting, very little is going towards benefit payments.

So, NSSA was supposed to maximise during that period, where we had very little pension claims being made and we had managed to substantially invest, as I said, through our diversified investment portfolio.

We are confident that our investments should be able to carry us through, together with contribution reforms. We are saying through this coming actuarial evaluation, we are hoping that it will open doors for an increase in contribution rate because we have seen that in the past more emphasis has been on changing the benefit pensions, as opposed to the contributions rate.

So, we are hoping that the contribution rate will also boost the amount of money we are going to collect and then boost the reserves and leave money for investments as well.

Q: Out of the nine branches of social security – family allowances, medical care, sickness, maternity, employment injury, unemployment benefits, survivors, old-age and invalidity – recommended by the International Labour Organisation (ILO) as minimum standards, Zimbabwe currently only has four. Is it even possible for the country to achieve all these standards?

A: It is not practical to introduce all nine branches of social security at one go. Even according to the ILO guidelines, it is a gradual process. We have tried several times to launch the National Health Insurance Scheme, but because of the economic environment, the timing was not ripe, so, we are hoping that as our economy pulls, we will indeed roll out all branches of social security so that we improve on the number of branches that we are currently covering to maybe five or six.

Q: What role does NSSA play in ensuring that unregistered employers register for the future security of their employees?

A: We have a compliance unit that is responsible for going around ensuring that they bring to book all those employers who are evading the system. These are found throughout the six regions that I talked about, as well as in our sub-offices.

So, these compliance inspectors actually go door-to-door looking for employers and ensuring that they are registered with NSSA. The other way we can help is also to educate our contributing populace, empower the employee to say social security is your right, it serves your own interest to be registered with NSSA. They are free to come and check their own registration status with us, to say, I have been working under employer X, am I registered? That will also ring a bell to us to say is that particular employer registered with us for starters. If they are not, then our compliance inspectors will visit that particular employer.

The security of that employee is always protected to ensure that there is no victimisation in terms of anonymity.

The other way is to continuously educate the contributing members to say NSSA exists to serve them.

It is their right to know whether they are registered or not. The problem that we face is, if that main contributor passes on, if they are not informed, what more their dependants and their surviving spouse?

So, the onus is on the contributing member to ask if they are a registered member.

Q: Have you been able to fish out any non-contributing employers?

A: Oh, yes, we do that on a daily basis and the legislation provides that there are penalties that are levied against such defaulters, if they are found. So, the role of the compliance inspection is to ensure that the employers are paying, and those that are not, they continuously try to, to ensure that the working population is covered.

Q: What is your parting shot in reference to social security?

A: As NSSA, we remain committed to the provision of social security in Zimbabwe and it is our endeavour to ensure that we remain relevant to the social security industry through meaningful service delivery. We hope that through revision of our pension levels, as we eagerly await, we continue to be relevant to the Zimbabwe population.