MPs query pension policy

Finance minister John Rwangombwa on Tuesday explained issues and dispelled ‘unfounded’ fears by MPs about pension bill during a consultative session in the chamber of deputies.The meeting was requested by the House’s standing committee on social affairs which is currently examining the pension bill.The minister shed light on the forthcoming changes including: increasing the minimum retirement age from 55 to 60 years, the introduction of an earnings ceiling on which basic pension will be based, as well as introducing the provident fund for contributions above the ceiling.He dismissed concern by some MPs that people are seeking early retirement “in big numbers” due to the fear of the minimum retirement age being increased from 55 to 60 years. MP Charles Kamanda said: “This bill has been in Parliament for some time but what one can say is that it has upset people.”“There are people who are running away from employment so that they cannot be affected by this bill. I request that, in the studies being done, the numbers of these people should be verified so that we clearly know what impact the bill has since I suspect that these people are not few.”Rwangombwa hit back: “This is not true and it is unfortunate as this session is live on TV. You are causing confusion among Rwandans. The figures we have here indicate that it is not true – people are really not freeing because of this bill.”The minister told the House that in 2010, people above 55 years of age who retired were 153.“During the past year (2011), as this bill was being prepared, it was 102 people. This year, as per the month of June, it has been 51 people and as such, there is nothing indicating alarm of any kind. Sincerely, it would not be appropriate for us to sit here and inform the public that the bill comes to cause mayhem,” Rwangombwa said.Even without the law, few people were requesting for retirement, the minister said, noting that current figures indicate that a small proportion of the population – 15,197 Rwandans above 55 years are listed as working and earning.The minister also stressed that the minimum retirement age, from 55 to 60 years, was considered as the country can only rely on its human resource for development since it has no substantial natural resources to depend on.At the onset, while alluding to the condemnation the French government received for cutting the retirement age from 62 to 60, years, in 2010, MP Henriette Mukamurangwa and others had insisted that there was no need to rush and increase the minimum retirement age from 55 to 60 years.Mukamurangwa said: “Why did you add the five years? Why can’t it be one or two years, and with clear reasons? In France, they added two years but it caused problems!”“Our country is struggling to develop and it is only our hands that will help us grow. Thus, a Rwandan who still has the ability to work should continue to work as there is no need for them to retire and benefit from pension yet they could continue contributing to the economy’s growth,” Rwangombwa said. The minister also refuted claims by some MPs that delayed retirement is denying the youth employment opportunities.“Let us separate the issue of finding employment for the youth from retirement. There are various programmes government is putting in place to find employment for the youth especially since government’s plan is to have every one working and contributing to the country’s development. The issue of youth employment is an important pillar in our EDPRS.”Government is also considering issues such as an earnings ceiling of Rwf400, 000. This ceiling has been provisionally considered, following advice received by Actuarial Consulting Group’s studies. Government considers that a ceiling of Rwf300, 000 may result in too drastic a cut in basic pension for high income earners. On the other hand, a ceiling of Rwf500, 000 may be too high as it is only applicable to three percent of members according to a December 2007 study. The earnings ceiling is reviewed every five years and a new valuation underway is expected to consider this issue.Government is also considering that the interest granted on the Provident Fund should depend on the actual investment performance of the monies invested as any guarantees added could potentially cause problems in the future. The Rwanda Social Security Board (RSSB) says that changes are needed to the pension scheme to make it sustainable for the future. Regular checks on the health of the pension scheme have shown that current levels of contributions are too low for the level of benefits awarded.Information obtained by The New Times indicates that if a person has 15 years’ of service, their retirement funds will be 30 per cent of their higher average salary in the last three or five years. With more than 15 years’ of service, then one earns an additional two per cent for each additional year. If you one has less than 15 years’ service, then they will receive a lump sum settlement, provided they have contributed for at least 12 months. This payment is equivalent to a worker’s average monthly salary multiplied by the number of 12 month-periods of insurance.Pension or lump sum settlement benefits are payable from age 55 (or the pension age fixed by particular statutory arrangements). One can also chose to work post age 55 and continue to earn benefits.Proposed changes include increasing the minimum retirement age from 55 to 60 years.

National

MPs query pension policy