Opinion / Columnist
Minimum pensions go up this month
13 Aug 2013 at 06:09hrs | Views
Minimum pensions go up this month for all those who are receiving NSSA pensions. The minimum retirement pension goes up from US$40 to US$60. The minimum invalidity and survivor's pension goes up from US$20 to US$30. Workers' Compensation pensions also go up. Those already receiving Worker's Compensation Insurance Fund pensions will have their pension increased by 20 percent. The minimum WCIF pension goes up from US$30 to US$45.
The minimum widow or widower's WCIF pension goes up from US$20 to US$30, while the minimum children's pension and dependant's pension goes up from US$10 to US$15.
Funeral grants for the funerals of national pension scheme contributors and pensioners who die go up this month from US$200 to US$300. The WCIF funeral grant also goes up from US$200 to US$300.
The increase in pensions follows the increase in June of the contribution rate and the raising of the maximum insurable earnings limit from US$200 to US$700.
The contribution rate increased in June from 6 percent, split equally between employer and employee, to 7 percent.
This increase, together with the rise in the insurable earnings ceiling to US$700 per month, means that employees are now having a national pension scheme contribution of 3,5 percent of basic earnings, up to a maximum basic earnings level of US$700 per month, deducted from their wages.
It also means that those eligible for a NSSA pension who are earning up to US$700 per month now have their pension calculated on the basis of their actual basic earnings and their pension contribution period, whereas prior to June the highest insurable earnings on which pensions could be calculated was US$200.
A person earning US$500 per month, for instance, is now contributing US$17,50 per month to the pension scheme. If such a person was to retire now, after contributing to the pension fund since contributions began in October 1994, that is after 18 years nine months, the monthly pension payable would be almost US$125.
Those who are due to retire soon can easily calculate their pension, since the formula used by NSSA is the number of contribution years multiplied by the insurable income on retirement multiplied by 1,333 percent.
For someone earning US$300 who has contributed to the scheme since inception that would be about US$75. For someone who had contributed for the same length of time on an income of US$400 it would be almost US$100. If the same person was earning US$700 or more it would be almost US$175.
Had the maximum insurable earnings limit still been US$200 the pension of all of these people would have been under US$50.
What determines one's pension is the contribution period and insurable earnings at retirement. The majority of existing pensioners retired at a time when there was a low insurable earnings ceiling.
These are the pensioners who stand to benefit from the increase in the minimum pension level, as well as those who retire now whose contribution period and insurable earnings are insufficient to give them a pension of more than US$60.
A person retiring at the end of July who had contributed to the scheme since its inception and was on a salary of US$240 a month would be entitled to a pension of about US$60. Anyone who contributed for less than this or has insurable earnings of less than this amount would normally be entitled to less than this minimum amount.
What the raising of the minimum pension level does is to ensure that nobody receives a retirement pension of less than US$60 per month or a survivor's or invalidity pension of less than US$30. Many of those who retire over the next few months will receive more than this, depending on their insurable earnings.
While the pension one is entitled to on retirement normally remains the same for life, it can be increased through either a cost of living adjustment or the raising of the minimum pension to a level that is higher than the pension one has been receiving.
That is what is happening this month. The numerous retirement pensioners who were previously receiving a minimum pension of US$40 or slightly above that will from this month receive a pension of US$60 per month.
Likewise those receiving a survivor's pension of US$20 or an invalidity pension of US$20 will from this month receive US$30.
Normally a survivor's pension is 40 percent of the pension that the contributor or pensioner who died would have been entitled to. However, NSSA has ensured that the minimum survivor's pension is 50 percent of the minimum retirement pension.
All existing WCIF pensioners will also enjoy a 20 percent increase in their pensions, while the minimum WCIF pensions go up as well.
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Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme, PaMheponeNssa/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 mail@mhpr.co.zw 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.
The minimum widow or widower's WCIF pension goes up from US$20 to US$30, while the minimum children's pension and dependant's pension goes up from US$10 to US$15.
Funeral grants for the funerals of national pension scheme contributors and pensioners who die go up this month from US$200 to US$300. The WCIF funeral grant also goes up from US$200 to US$300.
The increase in pensions follows the increase in June of the contribution rate and the raising of the maximum insurable earnings limit from US$200 to US$700.
The contribution rate increased in June from 6 percent, split equally between employer and employee, to 7 percent.
This increase, together with the rise in the insurable earnings ceiling to US$700 per month, means that employees are now having a national pension scheme contribution of 3,5 percent of basic earnings, up to a maximum basic earnings level of US$700 per month, deducted from their wages.
It also means that those eligible for a NSSA pension who are earning up to US$700 per month now have their pension calculated on the basis of their actual basic earnings and their pension contribution period, whereas prior to June the highest insurable earnings on which pensions could be calculated was US$200.
A person earning US$500 per month, for instance, is now contributing US$17,50 per month to the pension scheme. If such a person was to retire now, after contributing to the pension fund since contributions began in October 1994, that is after 18 years nine months, the monthly pension payable would be almost US$125.
Those who are due to retire soon can easily calculate their pension, since the formula used by NSSA is the number of contribution years multiplied by the insurable income on retirement multiplied by 1,333 percent.
For someone earning US$300 who has contributed to the scheme since inception that would be about US$75. For someone who had contributed for the same length of time on an income of US$400 it would be almost US$100. If the same person was earning US$700 or more it would be almost US$175.
Had the maximum insurable earnings limit still been US$200 the pension of all of these people would have been under US$50.
What determines one's pension is the contribution period and insurable earnings at retirement. The majority of existing pensioners retired at a time when there was a low insurable earnings ceiling.
These are the pensioners who stand to benefit from the increase in the minimum pension level, as well as those who retire now whose contribution period and insurable earnings are insufficient to give them a pension of more than US$60.
A person retiring at the end of July who had contributed to the scheme since its inception and was on a salary of US$240 a month would be entitled to a pension of about US$60. Anyone who contributed for less than this or has insurable earnings of less than this amount would normally be entitled to less than this minimum amount.
What the raising of the minimum pension level does is to ensure that nobody receives a retirement pension of less than US$60 per month or a survivor's or invalidity pension of less than US$30. Many of those who retire over the next few months will receive more than this, depending on their insurable earnings.
While the pension one is entitled to on retirement normally remains the same for life, it can be increased through either a cost of living adjustment or the raising of the minimum pension to a level that is higher than the pension one has been receiving.
That is what is happening this month. The numerous retirement pensioners who were previously receiving a minimum pension of US$40 or slightly above that will from this month receive a pension of US$60 per month.
Likewise those receiving a survivor's pension of US$20 or an invalidity pension of US$20 will from this month receive US$30.
Normally a survivor's pension is 40 percent of the pension that the contributor or pensioner who died would have been entitled to. However, NSSA has ensured that the minimum survivor's pension is 50 percent of the minimum retirement pension.
All existing WCIF pensioners will also enjoy a 20 percent increase in their pensions, while the minimum WCIF pensions go up as well.
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Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme, PaMheponeNssa/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 mail@mhpr.co.zw 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.
Source - National Social Security Authority
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