Home » General » National Pension Scheme Pays Out Benefits, Not Refunds

There seems to be a misunderstanding among some people about the nature of the national pension scheme. Some people seem to think that they are entitled to a refund of contributions in the event of a person leaving employment or dying.

There are those who, having left work long before retirement age, ask how they can collect their contributions while others ask how they can collect the contributions of a parent or other relative who has died.

The scheme does not work that way. It is a pension scheme, not a savings scheme. Benefits are paid to members who become entitled to them due to retirement or invalidity and to the surviving dependants of a deceased member.

Perhaps those who have left work think they may be entitled to a refund of contributions because this is what often happens with occupational pension funds, which tend to be tied to a specific job.

The national pension scheme is different. It is a national scheme. In every formal sector job, contributions are paid to the national pension scheme. When the time comes to retire, the contribution period that is taken into consideration in calculating the retirement benefit will be made up of all the months in which contributions to the scheme were made in different jobs over the years.

There are no contributions refunded, except to those who, when they retire, had contributed to the scheme for less that 12 months and so do not qualify for a benefit and those who on reaching the age of 65 continued contributing to the scheme, although contributions should end at age 65 and the retirement benefit be claimed then, if it has not been claimed already.

When a member of the pension scheme becomes eligible for a retirement pension or grant, the benefit is calculated on the basis of the person’s contribution period and last insurable earnings, not on the amount contributed.

When a member of the scheme dies, a pension or grant, depending on the person’s contribution period, is paid to his or her spouse and to his or her dependent children.

The amount is calculated on the basis of 40 percent of what the contributor would have been entitled to at the time of death.

The amount calculated for the spouse is the same amount, whether there is one spouse or several. If there is more than one spouse then the amount is shared between them. The same applies to the children. It is a single amount for all the children.

However, since the spouse receives 40 percent of what the member of the scheme would have been entitled to and the children also receive 40 percent, the family as a whole receives a benefit that is 80 percent of what the member of the scheme would have been entitled to.

The survivor’s benefit is intended for those who were the scheme member’s dependants. Thus, while the spouse is always entitled to it, only children under the age of 18 or, if still in full-time education, 25 are eligible for the survivor’s benefit.

This age restriction does not apply, however, to a child who is, unable to support himself or herself due to a permanent disability.

Where there is no surviving spouse or children, a survivor’s benefit may be paid to the contributor’s parents or other relative, if they were registered with NSSA as dependants and genuinely dependent on the deceased contributor.

If there are no surviving dependants then no payment is made to anyone. Adult children of a contributor to the pension scheme cannot claim anything for themselves in the event of a parent’s death, unless they are incapable of supporting themselves due to a disability.

A retirement pension or invalidity pension is paid by the national pension scheme to the member of the scheme who qualifies for it. How much the pension is depends on the person’s contribution period and insurable earnings. In the case of invalidity benefit the person’s age at invalidity is also taken into consideration, where contributions have been made for less than 10 years.

The size of a person’s family does not affect the size of the pension. A recent recipient of the minimum invalidity pension of $30 pointed out that he had a wife and child. He asked whether his wife and child were included in this amount.

The invalidity pension, like the retirement pension, is paid to the contributor. There is no separate allowance for a spouse or children.

Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme on social security, Pa- mhepo neNSSAEmoyeni le NSSA, at 6.50pm every Thursday on Radio Zimbabwe and Friday on National FM. 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) 7065235, 7065459, or 7990301.

Source : The Herald