DEAR readers, this week I will focus on the National Pension Scheme (Amendment) Bill, 2015, which went through second reading in Parliament last week.
Labour and Social Security Minister Fackson Shamenda stated that on May 16, 2015, Government revised the retirement age for public service workers under the Public Service Pensions Fund (PSPF) to 60 years as normal retirement, with optional early and late retirements at 55 and 65 years, respectively.
In order to ensure harmonisation of the retirement ages in the public and private sectors, and uniformity across the pension schemes, the Government laid on the floor of the House the National Pension Scheme Authority (NAPSA) and Local Authorities Superannuation Fund Amendment Bills to equally allow for 60 years as normal retirement with optional early retirement at 55 years and optional late retirement at 65 years.
The changes imply that those who are contributing members and wish to retire early at 55 years may proceed to do so while those who elect to continue in employment are also free to do so up to the normal retirement age of 60 years.
Upon mutual consent between an employee and employer, an employee may continue in employment until late retirement at the age of 65 years.
These changes will not affect the accrued rights of workers. For workers who were employed at the time when the changes were enforced, their rights are going to be accrued to the extent that they will be entitled to retire or opt out at the age of 55, unless they wish to continue.
The changes in the retirement age have attracted heated debates, but it is important to study the conditions that made this shift necessary.
As the minister indicated in Parliament, the decision to adjust the retirement age took into account the following fundamental factors:
The retirement age of 55 years under NAPSA is not in conformity with the prevailing economic, demographic and other statistical and actuarial considerations.
For instance, actuarial valuations conducted independently by the International Labour Organisation, International Monetary Fund and World Bank recommended an upward adjustment of the retirement age.
The proposed amendments will improve the financial position of the pension system and result in increased pension benefits while providing an option for those who wish to retire based on the old system to do so.
The Government undertook a comparative analysis of countries in the Southern African Development Community (SADC) region which showed that Zambia was the only country that had the lowest retirement ages while the majority of the countries in the region have retirement ages of either 60 or 65 years.
For example, the retirement age for Tanzania, Zimbabwe, Angola and Namibia is 60 years while the Democratic Republic of Congo is at 65 years.
It is against this background that the amendment to the National Pension Scheme Act is required and proposed.
The minister requested Members of Parliament (MPs) to support the Bill because failure to do so will result into having different retirement ages for public and private sector workers as well as different pension rights under the three statutory pension schemes.
Additionally, these changes provide an opportunity for Zambia to address the plight of pensioners, retirees and members in a manner that is affordable and sustainable in the long term.
In arriving at these changes, Government consulted all the key stakeholders that included PSPF, LASF, NAPSA, Pensions and Insurance Authority and social partners such as the Zambia Federation of Employers, Zambia Congress of Trade Unions and Federation of Free Trade Unions in Zambia.
Kasenengwa MP Victoria Kalima said when the topic was introduced by the Government through then acting President, Guy Scott, there was a lot of debate in the country and uncertainty in terms of what would happen among workers, especially those that were about to retire or had planned to retire in a year or two.
Ms Kalima, who was in support of the Bill, thanked President Edgar Lungu for his intervention in the matter and the clarification he made.
“Mr Speaker, I am glad that the Bill brings in three pensionable classes. It provides for retirement at 60 years, early retirement at 55 years and late retirement at 65 years.
“This clarification takes care of everybody. It takes care of those that would want to go on early retirement, those that would want to go up to 65 years and now probably, a bonus for those that would want to retire at 60 years,” she said.
Ms Kalima said while she supported the provision of various age categories that allows everybody a choice, she knew that early retirement was beneficial.
“For example, if we have 10 people retiring at 55 years, out of these, probably eight would want to start up companies like I did with Plant Agri-chem.
“Out of the eight companies that would have been started, maybe four would flourish and would be able to employ at least 10 workers. In 10 years, these workers would have multiplied to four hundred,” she said.
She was satisfied with the different ages that had been considered as opposed to imposing 65 years as the retirement age.
She, however, sought clarification on early retirement.
She said there should be a clarification on the difference between early retirement and late retirement.
Siavonga MP Kennedy Hamudulu said various submissions on the National Pension Scheme (Amendment) Bill, 2015, were considered, and that the object of the Bill was to amend the National Pension Scheme Act, Cap. 256 of the Laws of Zambia in order to revise the retirement age from 55 to 60 years for all members of NAPSA.
According to Mr Hamudulu, all the stakeholders who appeared before the Parliamentary committee were in support of the Bill as it would harmonise the retirement age among the pension schemes.
He, however, said while appreciating this revision, stakeholders raised concerns on a few clauses. For instance, clause 18(2), which allows the employees to retire subject to the approval of the employer, raised concerns from various stakeholders.
They submitted that this provision is not necessary as the scheme would already have made provision for the member to enjoy the benefits whether that member’s employer is ready for them to retire or not.
In any event, Mr Hamudulu said, the employer has absolutely no say over the management of the scheme and as such it is unnecessary for a member to seek the employer’s approval before retiring.
He said it was further observed by the stakeholders that the Bill did not differentiate entitlement to full pension between early retirement and late retirement.
This means there would be no incentive for someone to continue working beyond 55 years.
The stakeholders lamented that this could defeat the aim of securing the liability of the pension because the fund will be required to pay the member.
“Mr Speaker, stakeholders also expressed concern that it was important for the issue of accrued rights to be clarified when effecting the changes to the retirement age.
“They stated that this would assure the public that any member who would have joined the pension scheme prior to the current amendment of the National Pension Scheme Authority Act would effectively and legally still be entitled to the same benefits currently obtaining, including the right to retire at the age provided for under the current legal framework,” Mr Hamudulu said.
Mumbwa MP Brian Chituwo said, in supporting the Bill, he strongly felt that the benefits accruing from the Bill were only partial.
“They are partial in the sense that, there are inherent serious problems in the National Public Service Pension Scheme, the Local Authority Superannuation Scheme or fund except for NAPSA.
“We have seen that the current public service pensions fund is actually practically insolvent. When one considers that the fund base is only K1.5 billion as at 31st December, 2014 with liabilities of K24.4 billion. So, clearly, one can see that they are serious problems,” Dr Chituwo said.
Dear readers, next week I will highlight other views expressed by different MPs.
For now, let us keep the link open as we share issues on labour and employment.
(This column is an initiative of the Ministry of Labour and Social Security. For comments or questions, email info@mlss.gov.zm or niza12001@yahoo.com)