adminA contributor to the national pension scheme (NPS) who leaves his or her job can arrange to continue making contributions to the scheme on a voluntary basis but this has to be done soon after leaving one’s job.
It may be useful for a contributor who has left a job and not yet found another one to arrange to continue NPS contributions voluntarily in order to enhance his or her contribution record.
One’s contribution period determines whether one receives a pension or a grant. It also affects the size of one’s pension or grant. That is why making voluntary contributions could be a wise decision.
However, arrangements have to be made with NSSA to do this. The contribution would be double that which the contributor had been making while in employment, since there would be no employer to share it with.
Any such arrangements have to be made within a year at the most of one leaving one’s job and hence stopping making contributions through one’s employer.
To register, a voluntary contributor completes Form P8, which is obtainable from any NSSA office. It can also be downloaded from the NSSA website (www.nssa.org.zw <http://www.nssa.org.zw>).
Pension scheme contributions are 3,5 percent of one’s insurable earnings. The voluntary contributor pays seven percent of his last insurable earnings to cover the employer and employee contributions.
There is currently a maximum insurable earnings level of $700 a month. What this means is that for anyone with basic earnings of $700 or below, the insurable earnings are the same as the basic earnings. However, for anyone earning $700 or above, the insurable earnings are $700. The voluntary contributor maintains the last salary he was earning when he/she stopped working for purposes of voluntary contributions.
A minimum of 120 months contributions have to be made to entitle one to a retirement pension, when one reaches the prescribed pensionable age, which is 60, if one is retired or unemployed, or 65 whether one is unemployed or not.
There is an early retirement age of 55 for those who are unemployed at that age and spent at least seven of the 10 preceding years employed in an arduous occupation such as agricultural work, heavy truck driving, quarrying and some forestry and mining jobs.
Those who have not contributed to the pension scheme for at least 120 months are eligible for a retirement grant instead of a pension, provided they have contributed to the scheme for at least 12 months.
The two factors that affect the size of a retirement pension or retirement grant are the individual’s contribution period and insurable earnings. The longer the contribution period and the higher the insurable earnings, the higher the pension or grant a contributor is entitled to.
Someone wrote to this column saying he contributed to the pension scheme for seven years up to 2001 and then lost his job. He said he now wanted to continue contributing as a self-employed person. Voluntary contributions can only be arranged within 12 months of leaving one’s job. He left it too late, therefore, to arrange voluntary contributions.
However, if he has a proper business in which other people are employed, he could register the business as an employer with NSSA. He would then be given a social security registration (SSR) number and an employer code (EC).
He would then ensure the business employees, including himself, are registered with NSSA, deduct contributions for the national pension scheme from employees’ wages each month and pay to NSSA the combined employer/employee contribution of seven percent of all employees’ wages, along with the employer’s Worker’s Compensation Insurance Fund (WCIF) premium for all employees.
This way of resuming contributions, presumes that the employer himself receives a wage as an employee of the business. Pension scheme contributions are a percentage of each employee’s insurable earnings. The employee contributes 3,5 percent of his/her insurable earnings. The employer pays the other 3,5 percent.
To register, the employer completes Form P2, which is obtainable from any NSSA office. It can also be downloaded from the NSSA website. The employee registration form is Form P3, which is also obtainable from any NSSA office or from the NSSA website.
Anyone with a business which employs people can register with NSSA. Any employer within the formal business sector is legally required to register with NSSA within 30 days of becoming an employer.
The national pension scheme currently excludes employees in the informal sector.
Former contributors living abroad, who, realising that their national pension scheme benefit depends on the contribution period and insurable earnings at retirement, have asked whether it is possible for them to make voluntary contributions from abroad.
It would be possible if arrangements to make voluntary contributions had been made with NSSA within 12 months of their leaving employment in Zimbabwe. However, since they did not make any such arrangements and many years have gone by since they went abroad, it is too late for them to be able to make voluntary contributions.
When they return to Zimbabwe and obtain employment within the formal sector, or start their own business and register it with NSSA, their national pension scheme contributions will continue from where they left off. Whether they receive a pension or a grant when they reach pensionable age and how much they receive will depend on the total contribution period and their insurable earnings when they last contributed to the scheme.
- 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] <mailto:[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.
Online Reporter