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Rethinking paltry pension payouts

05 Apr 2020 at 08:26hrs | Views
WITH the coronavirus (Covid-19) causing significant economic and social disruptions across the globe, its impact is likely to be keenly felt by the most vulnerable members of society.

The pandemic has caused immeasurable damage and engendered heightened uncertainty.

With Zimbabwe already in the throes of an inflationary environment, the virus is likely to affect vulnerable members of society the most, not least pensioners.

The country does have social protection policies and programmes designed to reduce poverty and vulnerability by promoting efficient labour markets, diminishing people's exposure to risks and enhancing their capacity to protect themselves against loss of income.

Can the National Social Security Authority (NSSA)'s current pensions' model cope with the new pressures?

Likely not.

That is why the State pensions' body is moving to expedite the establishment of actuarial valuation for pensions calculations, which would work to ensure a better and more sustainable way of calculating pension payouts, especially during periods of serious economic disruption.

"The authority is looking at reviewing both upon gazetting of the necessary statutory instrument. It is hoped that this will happen soon so that NSSA can increase benefit levels to the relief of its suffering pensioners. We need to improve the welfare of pensioners in these hyperinflationary times," said acting managing director Mr Arthur Manase.

Presently, benefits levels are dependent mainly on the period of contribution and insurable earnings at the time of retirement.

Currently, the insurable earning ceiling is $700.

The insurable earning ceiling, together with the contribution rate, which is currently pegged at 3,5 percent for both employee and employer, has a bearing on NSSA's ability to increase benefit payouts.

To put it into perspective, as things stand, the most that an individual contributes to NSSA on a monthly basis is $24,50, which is 3,5 percent of $700.

But while NSSA last week announced a "discretionary bonus" for NSSA pensioners in view of the Covid-19 pandemic, a longer-term strategy is certainly required.

It is something that NSSA's management seems to appreciate.

Said Mr Manase: "The NSSA board, in consultation with the Minister of Public Service, Labour and Social Welfare, Professor Paul Mavima, has awarded NSSA pensioners a once-off discretionary bonus equivalent to a month's pension to cushion NSSA pensioners from the general increase in the cost of living. The bonus will be paid together with the April pension disbursements.

"The decision was taken as a stop-gap measure while the authority is working on a periodic actuarial review. The actuarial valuation will guide the authority in determining the level of benefits reviews, considering the long-term sustainability of its schemes."

The latest discretionary bonus comes five months after NSSA increased the minimum monthly pension from $80 to $200 for the Pension and Other Benefits Scheme (POBS) and the minimum worker's pension from $80 to $240 for the Accident Prevention and Workers Compensation Scheme (APWCS).

Prior to the review, NSSA awarded a similar discretionary bonus in July 2019.

At the time, the discretionary bonus was said — again — to be a stop-gap measure while the authority was waiting for the conclusion of a mid-term actuarial review that was being carried out as an urgent matter following significant progress made in the preparation of the authority's financial statements for the year ended 2018.

Pensioners are already feeling the double whammy of eroded disposable incomes and challenges spawned by the coronavirus.

Source - sundaymail
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