Preventing poverty and ensuring income security for older people is the prime aim of pension systems, without which one can suffer a miserable old age, and even pre-retirement living conditions in case of accidents or diseases that render them incapable of carrying on a living-earning work.

As the Rwanda Social Security Board (RSSB) joins the rest of the world to celebrate World Savings day on October 31, as well as a related week, The New Times’ Emmanuel Ntirenganya had an interview with the Chief Benefits Officer (CBO) at the Rwanda Social Security Board (RSSB), Dr Regis Hitimana, on the significance of saving in both pension plan and EjoHeza — Long Term Savings Scheme, and a look at the performance of their performance.

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The World Savings Day 2023 theme set up by the International Savings Bank Congress is "Your Savings, Your sustainable growth.”

Here are excerpts from the interview:

1. What is the rationale for the savings week and World Savings Day, and what its potential impact on savings?

This savings week that RSSB – and Rwanda in general — started celebrating since 2011 is a week that all the actors in the financial industry are mobilized to work together to mobilize the population on the importance of saving.

World Savings Day itself is celebrated on 31st of October, but we spend the whole week educating the population on the benefits of saving, why it is important first, to them, to their communities, and to the country.

When you earn an income, it’s not a guarantee that every time, every need will be covered by that income. So, you need to put some of your income aside to cover the needs that can come for different reasons. You can lose your job, you can fall seek, you will retire – that is for sure if you survive enough – you can suspend your work while on maternity leave or parental leave. So, all these are the needs that will require your savings.

2. In line with encouraging savings, what are the benefits that those who contributed to the pension scheme, and EjoHeza are entitled to in terms of social security, which could make everyone want to make savings?

Whether with mandatory pension or EjoHeza, saving for retirement gives you a dignified retirement. That’s number one ultimate for all the pension schemes. When you are young, you are capable of working, but certainly when you retire, you will not be able to earn your income.

When you didn’t save for yourself and probably don't have your own asset, those are the people that you see the government supporting because they didn’t save for themselves.

Dignified retirement [means] you don’t have to beg your family or government to have your daily expenditures covered. People who contributed to the pension scheme have dignified retirement; they can respond to their needs.

Secondary, before you retire, both EjoHeza and pension grant pre-retirement benefits.

For pension, for example, if you have an accident or fall sick to the extent that your doctor certifies you can no longer pursue your [income-generating] job, the fund starts providing you with a monthly pension until your retirement, then you continue with your old age pension.

For EjoHeza particularly, your savings are generating profit (return on investment), and that profit goes back to your contributions. So, your fund is growing itself. When you start saving very early, and save consistently, your account will grow itself because of the benefits that are added every day.

Again, in EjoHeza, when you have reached Rwf4 million contributions that are required for one to be entitled to pension when they retire, you can start using what is extra on education (such as paying school fees for your children), housing, or as a collateral for loans.

And both EjoHeza and Pension also have what we call survivors’ scheme. So, when you are no longer alive, your contributions, your savings will go back to your family members as per the laws.

3. Considering the current situation, how is the trend in pension savings (contributions) as well as benefits payouts like?

If we talk about formal pension – for the formal workers who earn a salary – on an annual basis, for example, last year, we collected Rwf 115 billion as pension contributions from about 722,000 contributors.

On the benefits side, considering the same period, we were paying about Rwf46 billion to only 50,000 people who are in retirement. So, you understand that we collect more from the active population (contributors) to cover [benefits of] people who are retired; and more people will be retiring as new entrants will join the contributors’ scheme. That is how the cycle is.

So, when you look at the trend, the good thing is that we are seeing what is happening in the economy is also happening in the savings trend.

We are recovering from Covid [pandemic], and the good thing is that over the last five years, the pension savings have grown, on average, at 13 per cent, while the contributors are growing at 7 per cent. This indicates that besides membership growth, there is also a general increase in contribution per member, reflecting salary increase.

Similarly, on the spending side, we are also seeing almost the same average 13 per cent increase in benefits payout, while it is only 5 per cent increase in pensioners. So, what does that mean?

It means that we are starting to see people who have saved a lot of money and are earning more benefits when they retire. That’s why the increase in retirement (pension) benefits is more than double compared to that of retiring people.

4. What is the current uptake of EjoHeza Long Term Savings Scheme – considering its performance?

This is a very interesting scheme in the sense that it is helping the country to fill the gap because the formal pension scheme is only covering around 9 per cent of people in working age.

But you will know that there is a big group of informal workers who are not contributing to the formal pension scheme. This is a scheme that was established for them. Although those contributing to the mandatory pension are also welcome to EjoHeza, the majority of our members come from the informal sector.

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As of 30th of September (2023), only in very few years (since EjoHeza was launched in December 2018), we had 3.3 million members – people who had created EjoHeza accounts. Among them, 2.7 million started saving and have already saved close to Rwf37 billion in the scheme.

But because this scheme is giving them a lot of benefits, what they save generates a return on investment which is between 11 and 13 per cent, and the government put in place an incentive mechanism. People have different targets and when they reach them, the government gives top-ups on their contributions.

So, when you sum up Members’s savings, plus what the government has given them (as top-ups or matching contributions), plus interests earned and distributed, the total fund (EjoHeza) known as Asset Under Management (AUM) is 51.5 billion as per data of October 30, 2023.

5. What are the major challenges that face savings among Rwandans, and what are the best strategies to address them with a view to fostering a savings culture?

Challenges are quite different between EjoHeza and Pension.

For Pension, it’s mandatory when you are employing someone, you have to contribute for him/her. When you are paying staff salaries — whether you have a contract or not, you need to contribute for them.

Therefore, for the mandatory pension scheme, the challenge number one is compliance; either because people want to evade their contributions, or as a result of lack of awareness regarding employee’s rights, and obligations of employers. Consequently, it is important for the RSSB to continue education and enforcement to ensure that people comply with the laws.

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For EjoHeza, as per EjoHeza law, contribution is voluntary. So, it’s not about enforcing, it’s about educating people to change their behavior to prioritize saving among other expenses people make every day. It’s a new scheme, we need to educate; we need to keep communicating about the benefits of long-term savings to all the citizens.

Another challenge is the process through which people contribute. The processes that we have are either long, or not fully automated, particularly for bulk saving. We are soon realizing a new digital system that will make all the processes very simple for the members to keep saving.

Particularly for EjoHeza, we want to make it simple in a way that you do it (save) as you spend. When you buy your airtime, when you buy your bus ticket or other items, using your MoMo (mobile money transactions), you decide on a percentage or a fixed amount that you want to go to EjoHeza.

Then, I think people will just see their accounts growing. Or you could set a standing order to your MoMo or Airtel money and voluntarily set a fixed amount to be deducted at a given period and be sent to your EjoHeza account.

We believe those initiatives will improve consistency in EjoHeza savings and hence increase average saving per member.