State-run pension fund, the National Social Security Authority (NSSA), is working towards adopting a self-adjusting mechanism on insurable earnings, in move that is expected to protect pensioners’ investments from value erosion.”
In recent years, as well as during the hyperinflation era of circa 2008, developments in the economy resulted in pension funds being eroded, which was hardest felt by the pensioners.
The current move to shift to a self-adjusting mechanism, is part of the authority’s wider reformation initiatives adopted by management.
Said NSSA chief executive Mr Arthur Manase: “Going forward, NSSA will be implementing a self-adjusting mechanism on insurable earnings, which is expected to improve the contributions income, thereby allowing the authority to review benefits pay-outs levels in line with changes in the economy.”
Currently, NSSA’s scheme is based on an insurable earnings ceiling (of $5 000), with the contribution rate split between the employee and employer at 4,5 percent each, giving an effective rate of 9 percent.
Comparably, Tanzania’s public sector scheme (for example) is based on a self-adjusting scheme with insurable earnings drawn from gross earnings, with the employer contributing 15 percent, while the employee contributes 5 percent, giving an effective rate of 20 percent.
Although variations abound across countries the general regional trend is that most schemes are self-adjusting.
The structural limitations inherent in the authority’s defined benefit (DB) scheme has had a drag on payouts.
But NSSA has stepped up actuarial valuations, following which payouts are reviewed.
“As had been planned, another actuarial valuation is currently underway to determine the next level of benefits that NSSA can pay sustainably. Results of this assessment are expected mid-March, with implementation planned for April 2021,” said Mr Manase.
To this extent, benefits will be reviewed in April. In the meantime, however, the authority has sought to ease the plight of its members and will pay grocery allowances between March and June that will total $491 million.
“In the interim, cognisant of the hardships that pensioners and other beneficiaries are facing due to the impact of the Covid-19 pandemic, NSSA in addition to disbursing the prescribed monthly pay-outs, NSSA…will disburse a total of $491 838 523 in grocery allowances to its 228 932 beneficiaries between March and June 2021,” added the chief executive.
“The authority is also exploring ways of improving the welfare of pensioners through non-monetary benefits such as empowering them through economic activities that generate sustainable income for them, like goat farming out grower schemes, discounts at participating shops, waiver of bank charges, a revolving fund for retirees and pensioners, as well as assistance with medical care, among others.”
Governments have implemented a number of measures to contain Covid 19, the major one being lockdowns to curtain people’s movements.
This has however affected pensioners mainly in Zimbabwe who have been unable to collect their monthly payments in some cases.
Last year, NSSA paid out discretionary bonuses as intervening measures, firstly between April and June at 100 percent of monthly pension, in July at 150 percent of monthly pension, and between August and October at 200 percent of monthly pension.
The last actuarial valuation recommended a 200 percent pension increase across the board, subject to a minimum retirement pension of $1 000, up from $200, while the funeral grant for both schemes was also reviewed from $2 000 to $5 000.