Zimpapers Logo

THE rate of increase in individual contributions to the national pension scheme following the June increases is dependent on what one earns. One correspondent wrote in to say that at his workplace people’s contributions had doubled. He seemed to be querying whether that could be correct.

Yes, this could be correct for some people. For some it might even have quadrupled. For others the increase could have been less than 1 percent. It all depends on how much the individual is earning.

Contributions to the pension scheme are calculated as a percentage of an employee’s monthly basic earnings up to a maximum earnings limit, known as the maximum insurable earnings.

The increase in the contribution rate introduced in June was small, only half a percent for the employee and the same for the employer. For an employee earning US$200 it meant an increase of one dollar, from US$6 per month to US$7 a month.

It is the raising of the maximum insur-able earnings limit from US$200 per month to US$700 per month that will have resulted in some people’s contributions increasing by about four times, depending on how much they are earning.

Prior to June the most that anyone paid, no matter how much they were earning, was US$6, which was 3 percent of the maximum insurable earnings limit of US$200. Now, however, those earning more than that pay 3,5 percent of their basic earnings up to the new maximum insurable earnings level of US$700 per month.

A person earning US$343 per month now pays a contribution of 3,5 percent of US$343, which is US$12, whereas previously the contribution was 3 percent of US$200, which was US$6.

A person earning US$700 per month now pays a contribution of US$24,50 while previously the contribution was the same as that of a person earning US$$200, namely six dollars.

The advantage for those paying significantly more than they were previously is that when they retire they can expect a better retirement benefit.

Those who earned more than US$200 but retired with their national pension scheme contribution based on insurable earnings of US$200 per month, received the same pension or grant as a person earning US$200 a month, since they were both paying the same pension scheme contribution, provided they both contributed for the same period.

In calculating retirement benefits, NSSA uses a formula that takes into account the person’s contribution period and insurable earnings at retirement.

Those who retire now will have their retirement pension or grant worked out on the basis of their contribution period and their actual earnings, provided they are not earning more than US$700 per month.

Those earning more than US$700 will receive the same benefit as those who earn US$700, since they are contributing the same amount to the pension scheme because US$700 is the current maximum insurable earnings limit.

That is the position of those earning more than US$700 who retire while the US$700 maximum insurable earnings limit is in place.
However, those for whom the normal retirement age of 60 or, if not yet retired, 65, is still a long  way off can expect that the insurable earnings limit may by then be much higher.

As long as their actual earnings are the same as or below the maximum insurable earnings limit, those who qualify for a pension can expect their pension to be a percentage of their income at retirement. For those earning above the insurable earnings limit, it will be a percentage of the maximum insurable earnings on which their contribution was based.

What the percentage will be will depend on the contribution period. After contributing for 40 years it should be 63,33 percent.
After 19 years, which is the most anyone retiring now could have contributed for, since the scheme has only been going for 19 years, it is just above 25 percent.

The minimum contribution period to qualify for a pension is 120 months. Anyone who has contributed for less than that but not less than 12 months is eligible, on retirement at the prescribed retirement age, to a retirement grant, which is a single payment.

A person eligible for a national pension scheme retirement benefit or any other benefit under the scheme should lodge a claim for the benefit.

Some people are still writing in saying they have contributed to the scheme and reached the age of 60 or 65 but have not received anything.
Benefits under the scheme have to be applied for. NSSA cannot be expected to know whether a person has retired or is still at the same address as when he or she registered or even if the person is still alive or not unless informed by way of submission of claim form P9/P10.
The claim form must be completed by the claimant and employer and accompanied by the required documentation.

In the case of a retirement pension or grant the only document required, apart from the completed P9/P10 form is a  certified copy of the claimant’s national identity card or valid Zimbabwean passport of driver’s licence.

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] <mailto:[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.