THE enactment of the National Pension Scheme Bill of 2023 into law, which allows beneficiaries to withdraw part of their pension, is expected to spur economic growth in Zambia.
It is widely believed that the partial withdrawal of pensions by members of the National Pensions Scheme Authority (NAPSA) will enable beneficiaries re-invest their money into various ventures thereby support economic growth.
In turn it is expected to lead to poverty reduction as more jobs will be created, businesses both in the private and public sector will be boosted.
In announcing the signing of the Bill into law, President Hakainde Hichilema said on April 17 this year that: “We have signed into law, the National Pension Scheme Amendment Bill
2023 which, in line with our promise to the Zambian people, allows for the partial withdrawal of pensions,”
The President says the new law will give citizens the opportunity to re-invest the funds into various ventures and assets of their choice.
This new law is in line with the United Party for National Development
(UPND) campaign promise in the 2021 general elections, to reform the National Pension Scheme and enable citizens access part of their pension contributions.
This is the first time such a thing is happening in the history of the pensions industry in Zambia where employees get a privilege to access part of what they are supposed to get before retirement.
NAPSA was established in February 2000 by the National Pension Scheme Act no. 40 of 1996 of the Laws of Zambia, following the closure of the Zambia National Provident Fund (ZNPF) after the responsible Act under which it was formed was repealed.
Some of the key responsibilities of NAPSA are, registration of employers and employees, collection of contributions, enforcement of compliance, investment of funds not immediately required for payment of benefits as well as the processing of claims and payment of benefits and education of members.
As of December 2022, out of 956,548 members contributing to the social security scheme, about 600,000 people qualified for the pre-retirement lump benefit according to NAPSA head of corporate affairs, Cephas Sinyangwe.
According to Labour and Social Security Minister Brenda Tambatamba, the new
law permits members from the age of 45 and those that have contributed to the scheme for at least five years to access 20 per cent of their benefits.
“The least projected withdrawal is K5,000, with the maximum, K160,000 per contributor,” says Ms Tambatamba as she presented the Bill for Parliamentary consideration ahead of the President’s assent.
Zambia Congress of Trade Unions (ZCTU) urges beneficiaries of the pension benefits to use the funds wisely.
ZCTU Secretary General Joy Beene says the law is an opportunity for employees to invest their money in businesses.
“This money comes at a time when most of the employees are still serving and have the energy to work. This is an opportunity to invest in land, farming for both crops and livestock so that they can earn extra income and also prepare for life after retirement,” states Mr Beene.
He says the move will spur economic development and reduce the high poverty levels in Zambia as there will be money circulating in the national economy.
The partial withdrawal will also help in addressing the continued borrowing from banks and community based domestic money lenders commonly referred to as shylocks.
The Ndola District Chamber of Commerce Industry (NDCCI) welcomes the partial withdrawal of benefits saying it will increase trade and commerce.
NDCCI president Joseph Malisawa says the partial withdrawal of benefits will promote entrepreneurship.
Mr Malisawa says the partial withdrawal would benefit employees and reduce poverty in the country.
“This move will increase disposable income to the recipient and the ripple effect of increased spending will increase trade and commerce from which the private sector is a beneficiary,” he says.
Mr Malisawa urges NAPSA fund recipients to invest or utilise their funds wisely.
“There is always a future to plan for, a legacy to leave behind and a generation to leave an inheritance for. So recipients should not withdraw money for consumption,” he cautions.
The Pensions and Insurance Authority (PIA) counsels employees to invest their partial withdrawal in ventures that will give them a return.
PIA registrar Namakau Ntine says the funds need to be re-invested and that beneficiaries should not concentrate on consumption.
Joyce Banda, an employee says the partial withdrawal will provide capital for her farming business.
“I have a farm; I have always wanted to start growing tomatoes and assorted vegetables. This money I will withdraw from NAPSA will enable me to sink a borehole, buy irrigation equipment and start production and have a return. I am very happy as this will help a lot of people venture into entrepreneurship and contribute to the growth of the economy,” she says.
However, some stakeholders are not in support of the partial withdrawal of the pension saying it will affect the retirement benefits and the pensions industry.
Blackson Singoyi, a retiree, observes that some young people are already making plans of misusing the money like spending it on depreciating assets.
Mr Singoyi advises that the partial withdrawal of the 20 per cent is a one-off thing and will affect their final pensions in future.
Social Economist Kelvin Chisanga says the partial withdrawal might have a negative effect on retirees and the local pension sector in general.
Mr Chisanga says some members will use the money to pay debts and that might have an impact in the future.
He calls on members withdrawing the money to seek financial literacy on how they will use the money wisely.
Benefits Consulting Services (BENCON) Zambia chief executive officer Bryson Hamanzuka notes that early pension will have far-reaching consequences on the social security conditions of citizens as people will be thrown into destitution and abject poverty in their old age.
Mr Hamanzuka says that despite membership being compulsory, NAPSA, which has been in existence since 2000, did not provide a sufficient universal social security net hence the need for Zambia to build an independent pensions and retirement benefits industry.
“As things stand since 2004, members have been allowed to withdraw their pension benefits from private occupational pension schemes at the termination or variation of their employment contracts,” he says.
Mr Hamanzuka is of the view that early pensions will increase the ability of members to access
their benefits which will lead to the pensions and retirement industry to suffer.
Pension’s expert Steve Williams calls on stakeholders to re-examine the nature, structure, and relevance of pension schemes in their current form to the average Zambian if the industry is to achieve long-term sustainability.
Mr Williams says the pensions in Zambia were effectively inherited from the colonial era, which adopted much the same rules and rationale for pension schemes that prevailed in the United Kingdom at that time.
Applications for the partial withdrawal of pension are currently being done online and one does not need to visit the NAPSA offices to claim.
As members start accessing their partial benefits, the country will witness increased business activities and its citizens increased income.
Increased trade and commerce will boost revenue collection by the Government which will be used for service delivery and development of other sectors.
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