Your pension: are you saving enough for your life after retirement ...

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Before going into details I would like to give a brief background about pensions in Zambia, thanks to Mr Justine Kabwe (Insurance Institute of Zambia president) for contributing some points to this topic.

Please note that a detailed account on this subject is contained in the book I have written dubbed ?Basics of Insurance, The Zambian Experience? which will be coming out very soon.

In Africa generally people in villages and even urban areas treasured the extended family and this provided a form of security in both food and shelter.

The traditional economic activity depending on the area of Zambia one prefers to study their history, would find that this notion was emphasised and promoted through working together.

If somebody had a big land to till they would agree on a certain day to go and assist that person through what in Bemba they called ?ichima? and after a hard day of toil they would sit together and share food cooked by women from various homesteads.

There is no evidence to show whether individually they saved for a rainy day in the future. The more children someone had the more secure they felt of their future.

However, against this belief, as renowned economist and writer Anita M. Shwarz (2003) pointed out, the extended family was not and has never been a perfect way to safe guard one?s future, especially if the children of that particular person are economically disadvantaged as well.

The history of formal pension provisions in Zambia spin around the set up of commercial enterprises somewhere around 1900s, with the main employment provided by the mines, subsistence farming, transport and later education.

? IN modern times employers are arranging a pension?s scheme on behalf of their employees.

The pension component was not imbedded in the employment conditions of service until the 1970?s when the government harmonised the retirement benefits for all para-state employees.

When the colonial government came into being, those in government started some form of savings which were arranged with insurance companies and retirement policies were either as deferred or immediate
annuities.

Subsequently, even those who were uneducated at the time of independence learnt that they could plan for their retirement while working and this put pressure on the colonial masters to extend
coverage to indigenous Zambians working especially in the civil service.

This led to the creation of what was called the Local Conditions Pensions Fund in 1968 to cover all civil servants in the country though this was later renamed the Public Service Pension Fund.

In 1954 the Local Authorities Superannuation Fund [LASF] was established to provide pensions for employees in the local authorities. Later in 1966 the government created the Zambia National
Provident Fund (ZNPF) to cover employees outside the civil service and local authorities.

Up until 1992, pension and insurance business was restricted to the state owned Zambia State Insurance Corporation Limited (ZSIC) which provided retirement policies through its Life and pension division.
The law did not allow competition except for Mukuba Pension Scheme set up for the mining industry. When the economy was liberalised several new players set up insurance companies which offered retirement
benefit plans (Hantuba. M 2005).

Zambia has a long history of both social security arrangements and pension practice predominantly based on social insurance principle with social security cover restricted to citizens in the formal sector
and social welfare based support based on social assistance to citizens who are unable to contribute to the conventional schemes.

The first ever Social Insurance was created by the Germany government during the reign of chancellor Bismarck in 1889 and from its initial stage to date it has gone through tremendous progress such that almost every country has its own system of social insurance.

In Zambia there are four statutory pension schemes, that is, the Public Service Pensions Fund (PSPF), the Workers Compensation Fund Control Board (WCFCB), the Local Authority Superannuation Fund (LASF)
and the National Pensions Scheme Authority (NAPSA).

In modern times we have seen employers arranging a pension?s scheme on behalf of their employees where an employee contributes a certain amount or percentage of their earnings and the employer also a
percentage.

These are referred to as occupational pension schemes and must be registered with the regulator of the pensions and insurance authority (PIA).

There are currently about 222 registered private and occupational pension schemes in Zambia covering over 100,000 members.

Types of Pension Schemes

The two common types of pensions schemes are Defined benefits (DB?s) schemes and Defined Contributions (DC?s) or money purchase schemes.

Please send your contributions/comments or questions to email: webster_tj@hotmail.com or webster@picz.co.zm or on face book search for Insurance Talk-Zambia page or call/text 0977 857 055

(The Author is a Chartered Insurer with eight years industry experience)

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Source: http://www.times.co.zm/?p=17821

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