adminThere are two crucial factors that determine the retirement pension of a contributor to the National Pension Scheme administered by the National Social Security Authority. These are the contribution period and insurable earnings at retirement. In some countries with longer established social security pension schemes, contributors approaching pensionable age often take into account the most appropriate point at which to retire and take their pension, where there are options for deferring their retirement and working longer may increase their pension.
With the Zimbabwe scheme there are two possible minimum retirement ages and one maximum retirement age.
The minimum ages are 60 or for those in certain specified arduous occupations, 55. The maximum or late retirement age is 65.
The standard minimum retirement age is 60. Anyone who has contributed to the pension scheme for at least 10 years can retire at 60 and claim a social security pension.
However, the person can also opt to continue working until the maximum retirement age of 65, thereby extending the contribution period. The person does not necessarily have to retire at age 65 but that is the last age at which contributions should be made to the pension scheme. On turning 65 the person becomes eligible for the pension, even if he or she has not actually retired.
Any contributions that continue to be made to the pension scheme after a person turns 65 will not be taken into account in determining the contribution period. They are refundable as contributions erroneously made.
It is also possible to retire at any time between age 60 and age 65 and claim one’s pension. Those working in jobs categorised by NSSA as arduous work, such as farm work, heavy vehicle driving and some mining, quarrying and forestry jobs, can claim their retirement benefit at age 55, provided they have been working in such jobs for seven of the preceding 10 years.
However, they do not have to do so. If they are capable of continuing to work and wish to do so until a later age they can do so.
It is only those who have contributed to the National Pension Scheme for at least 10 years by the time they reach pensionable age who are eligible for a pension. Those who have contributed for less than this but for at least 12 months are eligible for a lump sum retirement grant.
A person’s insurable earnings at retirement are just as important as the contribution period in determining the size of the retirement pension. Most people’s income increases as time goes by.
However, insurable earnings and actual earnings are not always necessarily the same. Insurable earnings are the earnings that are insured or insurable, in other words the earnings on which contributions are paid.
Pension contributions are a percentage of one’s insurable earnings. For many people the insurable earnings will be their basic wage.
However, where, as is the case at the moment, there is a stipulated maximum insurable earnings level, then those earning above that level only pay a contribution that is a percentage of the maximum insurable earnings. At the moment the maximum insurable earnings level is US$700 per month. The contribution rate is seven percent of insurable earnings, 3,5 percent of which is deducted from the contributor’s wage and the other 3,5 percent of which is paid by the contributor’s employer.
However, prior to June this year the maximum insurable earnings level was only US$200 per month. What can affect one’s retirement benefit level is the insurable earnings at retirement.
If one is earning above the maximum insurable earnings level, it may be better to take late retirement not only to increase one’s contribution period but in the hope that the maximum insurable earnings level may be raised before one retires or reaches the latest pensionable retirement age of 65.
One correspondent wrote: “Retired in 2011 December. My last pay was US$487. Turned 60 years in June 2013. How much will I get?”
How much this person will receive will depend partly on how many contribution years there were.
Presuming the person contributed for at least 10 years and is thus eligible for a pension, the pension would be calculated by multiplying the number of contribution years by the insurable income at retirement by a factor of 1,333 percent.
In 2011 there was a maximum insurable earnings limit in place of US$200 per month.
Thus this person’s insurable income at retirement would have been US$200. Presuming a contribution period of 18 years, this would result in a pension of US$48.
Because the minimum pension is US$60, he or she would receive a pension of US$60.
Had he or she continued working and contributing to the pension scheme and only retired now, the insurable income would have been the basic pay of US$487.
Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme, PaMhepo neNssa/Emoyeni leNSSA, discussing social security issues at 6.50pm every Thursday on Radio Zimbabwe and every Friday on National FM. There is another social security programme on Star FM on Wednesdays at 5.30pm. 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) 706517-8 or 706523-5.
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