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rates from June 1 and raising of the maximum insurable earnings from US$200 to US$700.

The minimum retirement pension goes up in August from US$40 to US$60, with the minimum survivor’s pensions and invalidity pensions going up from US$20 to US$30.

However, those who will gain most from the changes in contribution rates and the maximum insurable earnings limit are those retiring after the changes come into effect who are earning considerably more than US$200, say between US$350 and US$700, and have been contributing to the scheme for most of their working lives or since the scheme’s inception in 1994.

Those retiring at present earning more than US$200 who are eligible for a retirement pension have their pension calculated using their insurable earnings of US$200 per month.

With the raising of the maximum insurable earnings to US$700, those earning up to US$700 will be paying contributions based on their actual basic earnings.

When they retire, their pension will be calculated using their new insurable earnings. Those earning above US$700 will have their pension calculated on the basis of the new maximum insurable earnings limit of US$700.

A person retiring with insurable earnings of US$700 who has contributed to the pension scheme for 18½ years will receive a pension of more than US$172 a month.

Previously, the same person would have received a pension of just over US$49, because the insurable earnings would have only been US$200.

Insurable earnings are the earnings on which a person’s pension fund contributions are based. A higher insurable earnings ceiling means, therefore, higher contributions for those earning more than US$200 per month.

There is also an increase in the contribution rate as from June by half-a-percent for both the employee and employer, each of which will from June be required to pay 3,5 percent of insurable earnings.

This means the combined employee and employer contribution is from June 7 percent of the employee’s basic wage up to a maximum earnings level of US$700 per month. At present the combined contribution is 6 percent. The maximum monthly employee’s contribution, which is paid by those earning US$700 or more, is US$24,50.

The employer pays the same amount, making a combined maximum employee/employer contribution of US$49 instead of the current maximum of US$12 based on the current insurable earnings maximum of US$200.

The increase for those who earn US$200 or below is minimal. For a person earning US$150 the employee contribution goes up from US$4,50 to US$5,25. The employer will also pay US$5,25 instead of US$4,50.

For someone earning US$200, the contribution deducted from the employee’s wage goes up from June from US$6 to US$7.

Because of the present insurable earnings ceiling of US$200, a person earning US$500, for instance, currently pays the same contribution as a person earning US$200, that is US$6, which is only 1,2 percent of US$500.

Those earning US$200 and below therefore at present pay a higher percentage of their basic earnings as their pension contribution than those earning more than US$200 do.

However, as from June the new insurable earnings limit of US$700 means that everyone earning up to US$700 pays the same percentage of 3,5 percent of their basic earnings to the NSSA pension scheme.

The contribution is matched by the employer, who has to make the same contribution. Those earning US$300 will pay US$10,50 per month, with their employer paying the same amount towards their pension. Those earning US$500 will pay US$17,50. The contribution for those earning US$600 will be US$21 from the employee and US$21 from the employer.

Those earning US$700 and any amount above US$700 will pay US$24,50. Even those earning above US$1 000 will still only pay US$24,50.

However, because their insurable earnings are only US$700, if they retire while their insurable earnings are still at that level, they will receive a pension based on US$700.

The formula for calculating pensions is the number of contribution years multiplied by the individual’s insurable earnings at retirement multiplied by an accrual rate of 1,333 percent per year.

The longer the contribution period and the higher the insurable earnings at retirement, therefore, the better the pension.

The first contributions to the NSSA pension scheme were made in 1994. The longest contribution period anyone could have, therefore, is 18 years eight months.

To qualify for a retirement pension one must have reached retirement age and have contributed to the pension scheme for at least 120 months, which is 10 years.

Those who have contributed for a lesser period are eligible for a single retirement grant payment, provided they have contributed for at least 12 months.

The pension can be claimed on reaching age 60, provided one has retired, which means one should not still be employed.

At 65 years the pension can be paid even if the pensioner is still employed. There is an early retirement age of 55 for those who, for at least seven of the previous 10 years, were employed in an arduous occupation such as farming, heavy-truck driving and some mining, quarrying and forestry jobs.

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 le NSSA, 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 after 5.30 pm. 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.