FEATURED: RSSB engages the private sector on pension reforms and expected benefits

Kigali: Thursday, November 28th, 2024 – The Rwanda Social Security Board (RSSB) engaged with the private sector to discuss upcoming pension reforms, highlighting their benefits for both businesses and individuals. During a financial inclusion forum organized by the Private Sector Federation, RSSB CEO Regis Rugemanshuro addressed private sector representatives, outlining how these reforms will contribute to economic growth and strengthen social security. Regarding the broader impact of the reforms, RSSB CEO stated: :These reforms aim to ensure a sustainable pension system while unlocking opportunities for the private sector, especially small and medium-sized enterprises (SMEs). Initiatives like the SME Fund and improved capital market liquidity provide significant benefits to the private sector. Notably, RSSB’s Return on Investment (ROI) has grown from 4.9% in 2019 to 11.08% in 2023, with a newly developed investment policy set to sustain this upward trajectory. The private sector will benefit from the reforms in the following ways: SME Fund Launch: Scheduled for Q2 2025, this Rwf 30 billion fund aims to enhance access to capital for small and medium-sized enterprises (SMEs), fostering innovation and promoting economic growth. Increased Liquidity in Capital Markets: The reforms will directly channel additional funds into the capital markets, enabling more affordable lending and creating greater opportunities for businesses. Support for Research and Development: RSSB plans to establish a dedicated R&D fund to support start-ups and innovative ventures, fostering a dynamic and thriving ecosystem for entrepreneurs. Starting in January 2025, the pension contribution rate will increase from the current 6% to 12% to reach 20% by the year 2030, split equally between employer and employee. To facilitate a smooth transition, the increase from 12% to 20% will be implemented in 4 years with 2% annual increase from 2027 to reach 20% in 2030. Furthermore, to harmonize contributions with RRA taxable base, the pension contribution base will expand from the basic salary and housing allowance to the total gross salary, which will now include transport allowances. The phased approach to increase the pension rate ensures individuals and businesses have sufficient time to adjust to the new rates while strengthening long-term financial security for retirees. The mandatory pension scheme requires both employers and employees to contribute equally to the employee's pension. Currently, the total contribution rate is set at 6% of the employee's basic salary, with the employer contributing 3% and the employee contributing 3%. This 6% contribution rate established in 1962 when life expectancy was 47 years had not been updated until today, while according to the most recent census of 2022, the life expectancy in Rwanda has increased to 69 years. Meanwhile, the benefit package of pensioners has been increased over time, with latest increase done in 2018. Starting in January 2025, the pension benefits package will also be revised upward again to reflect the current cost of living, beginning with those receiving the lowest pension amounts.

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FEATURED: RSSB engages the private sector on pension reforms and expected benefits