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The national pension scheme operated by NSSA is now well past its second decade. Its 20th anniversary was in October last year. Almost four months have passed since then. The full value of the scheme, which started in October 1994, may only be appreciated in another two decades when those who began contributing to it as young men and women approach retirement.

After 40 years of contributions they will be able to expect a pension that replaces more than 60 percent of their monthly insurable earnings.

That will be what those who will be 60 in another 20 years’ time can expect, if they have contributed to the national pension scheme for a full 40 years and decide at that age to retire.

Should they decide at 60 years to continue working and contributing to the scheme until they are 65 years old, they could expect a higher pension.

After 45 years’ contributions, the pension’s insurable earnings replacement rate is expected to be 75 percent.

Those who began work at 18 years of age and retire at 65, after contributing to the pension scheme continuously for 47 years, should be able to enjoy a pension that replaces 79,7 percent of their last monthly insurable earnings.

The insurable earnings are the earnings on which an employee’s contribution is based. At present the employee contributes 3,5 percent of his or her insurable earnings to the pension scheme. The employer pays the same amount.For those earning $700 and below, their basic earnings are the same as their insurable earnings. For those earning $700 and above, their insurable earnings are $700.

Their monthly contribution is 3,5 percent of $700 regardless of how much more than that they earn.

That is because there is currently a maximum monthly insurable earnings ceiling of $700 when it comes to the national pension scheme.

However, that ceiling is sure to be raised, if not removed, as time goes by. Between May 2010 and May 2013 the maximum insurable earnings figure was $200. It was raised to $700 in June 2013.

Those who look at the minimum retirement pension of $60 that most pensioners are currently receiving from NSSA may be tempted to have their doubts about the value of the scheme.

What needs to be appreciated is that the way the national pension scheme is designed is such that as it grows older it replaces a higher proportion of a pensioner’s last insurable earnings.

The $60 minimum pension only reflects that the scheme is still relatively young. The scheme is financed solely by pension contributions from members of the scheme and their employers and from income earned by investing those funds.

The longer an employee contributes to the scheme and the higher his or her insurable earnings are at retirement, the higher the proportion of those insurable earnings the pension will be.

A new social security pension scheme only reaches maturity after it has been in existence for a minimum of 40 years.

That was why Zimbabwe’s national pension scheme’s 20th anniversary was marked with such excitement.

The scheme is half-way towards becoming a mature scheme which pays out pensions that represent a substantial proportion of the pensioner’s last insurable earnings.

Already a substantial number of people in employment in Zimbabwe can look forward to having contributed to the pension scheme for more than 40 years by the time they reach pensionable age. They can expect a pension that replaces a significant proportion of their insurable earnings.

School leavers beginning their first job can now, if they remain in formal employment within Zimbabwe, expect to contribute to the national pension scheme for their whole working life up to the age of 60 or 65.

They can expect a good pension that replaces a substantial amount of their previous monthly insurable earnings.

Any school leaver who began work in the formal sector at any time over the past 20 years can likewise expect to have contributed to the national pension scheme for their entire working lives by the time they retire, provided they have remained in formal sector employment within Zimbabwe.

Those who joined the scheme when they were already too old to contribute to the scheme for 40 years or more will be less fortunate.

The insurable earnings replacement rate applicable to the pensions of those who contributed to the scheme for 20 years is 26,7 percent. The replacement rate is less for those who had contributed for less than that when they retired.

However, the scheme had to start somewhere. Those who were young at the inception of the scheme will receive the highest pensions by virtue of having contributed for the longest period. This generally applies to future generations of pensioners, as they are likely to join the scheme when they are first employed.

As time goes by and more people are retiring after contributing to the national pension scheme for longer, the value of the scheme will become increasingly more apparent.

After 25 year contributions, which for those who have contributed to the scheme since its inception, is only another five years, the expected insurable earnings replacement rate will be more than 33 percent. After 30 years it will be 40 percent. After 35 years it will be 51,7 percent.

Those who have contributed for 40 years when they turn 60 may well consider deferring their retirement to 65, since it would make the difference between a pension that replaces 63,3 percent of their last insurable earnings and one which, after 45 years of contributions, replaces 75 percent.

It is not possible, however, in terms of the current regulations, to extend the contribution period beyond age 65.

At that age contributions should stop and the pension be claimed, whether or not the person is still employed.

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.