Social Security schemes provide only part of pensioner’s income

pensioners without additional pension or savings income in some countries have to have their pension topped up from a social assistance scheme.
Pensioners all over the world are encouraged to save, invest and contribute to other pension or retirement schemes, in addition to contributing to the social security pension scheme, to be assured of living comfortably after retirement.
In Zimbabwe many people in employment contribute to private pension schemes, as well as to the national pension scheme administered by NSSA.
On retirement they may supplement these pensions with savings and interest from investments they have built up over the years.
Many more, however, particularly in lower income jobs, have little to rely on when they retire but their national pension and whatever assistance they may be able to obtain from their families.
Those who contribute to private occupational pension schemes tied to their employment often stop contributing to it when they leave the job.
Frequently they are paid back their pension money when they leave, which means they may have to start contributing all over again to a new pension scheme when they start a new job.
If they have the option of continuing with their pension it may be wise for them to do so, though it is often tempting to take the refunded contributions, as it is ready cash they can use.
Doing this is shortsighted though. Since the pension payable when they retire will normally be related to the contributions made or contribution period, they may end up with only a meager pension, if they have to keep starting all over again with a pension scheme each time they leave a job and start a new one.
Membership of the national pension scheme is different. It is a national scheme.
It transcends individual job appointments. Contributions continue whatever job one is in, provided it is in the formal sector.
Contributions are deducted from employees’ salaries by the employer, who has to match the contribution and remit the combined contribution to NSSA.
When it comes to retirement, the number of contributions that have been paid will affect the amount that is payable as a pension.
The more contribution years there are the higher the pension. Some pension schemes determine the pension strictly on the basis of the contributions that have been made.
Others, such as the national social security pension scheme, take into account the contribution period and the individual’s insurable income on retirement.
Although the pension paid in such schemes is based in part on the individual’s salary or insurable income at retirement, it does not come to the same amount.
Not only would this not be feasible when pension contributions only amount to a proportion of one’s earnings but pensioners’ expenses are generally presumed to be less than those of a younger person with a family to look after.
In the United States, the Social Security pension is equivalent to about 40 percent of the average wage earner’s income on retirement. In many other countries it is much less.
With most pension schemes, a person’s gross salary constitutes his or her insurable earnings.
Pension contributions increase as the individual’s salary increases. The individual’s salary on retirement is generally higher than at any other point in his or her career, providing a good income on which to base the pension calculations.
Sometimes, though, there may be an upper limit on the amount of income considered insurable earnings.
This means that the contributions for those earning above that limit are based on a percentage of that figure rather than on their whole income.
That upper limit will also be the income on which pension calculations are based.
With the Zimbabwean national pension scheme the upper limit of monthly insurable earnings determined by Government is US$200.
This rather low upper limit means that contributions are low but also means that the pension of those who retire with US$200 as their monthly insurable earnings is low as well, since that is the income on which pension calculations will be based.
l The Talking Social Security column is published every Tuesday in The Herald by the National Social Security Authority as a public service. Readers who have any questions they would like dealt with in this column are welcome to e-mail their questions to [email protected] or text them to 0772-469801.