Pensioners have welcomed the move by Rwanda Social Security Board (RSSB) to implement a presidential order increasing benefits for pensioned workers.
The Presidential Order increasing pension and occupational hazards benefits granted by Rwanda Social Security Board, which was published in official gazette on April 16, 2018, states that pension and occupational hazard benefits granted to the insured person cannot be less than Rwf13,000 per month.
The new scale came into force on Wednesday.
“Pensioners have instructed us to write a letter to the President of the Republic thanking him for pension increment because it had been over 15 years since any such increment was last effected,” said Modeste Munyuzangabo, the president of Rwanda Pensioners’ Association.
The increment will cost the pension body between Rwf5 billion and Rwf6 billion annually, according to Oswald Munyandekwe, Director of Pension and Pre-retirement Benefits Department at Rwanda Social Security Board (RSSB).
“There were pensioners who received as less as Rwf2,800 or Rwf5,200 in benefits per month. Now, they will be receiving at least Rwf13,000 each,” Munyuzanga said.
Though pensioners argue that the Rwf13,000 minimum monthly benefits are about half of what is required for a pensioner’s monthly basic needs, especially food and beverages, they contend that the effected change is a step forward.
“One might think that the increase made is small when they consider individual pensioner. However, the Rwf2.2 billion that is going to be distributed among the retirees’ community and circulate within the economy, is a significant amount,” he said during a press conference in Kigali on Wednesday.
“There are those who were getting less than Rwf5,000 and, if you consider the fees that the bank was charging them to keep their accounts open, you realise that they were getting almost negligible benefits,” Munyandekwe said.
The increase was made by considering pension intervals, with the smaller the pension, the higher the increase rate, and the higher the pension the smaller the increase.
For the pensioners who had been receiving benefits between Rwf5,201 and Rwf10,000 per month, an increase of 149.8% to 101.04% was made.
“The formula that was set automatically distributes pension benefits to anyone in that bracket proportionally,” he said.
For benefits between Rwf10,001 and Rwf20,000, they got 100.9% and 63.02% increase.
A per centage increase of 63% to 34.22% was made for the benefits ranging from Rwf20,001 Rwf50,000 per month.
This category accounts for around 40 per cent of all pensioners, according to Munyandekwe.
Those who have been receiving pension and occupational hazard benefits above Rwf1 million are entitled to an increase between 0.502% and 0.071%.
Scheme to remain sustainable
Talking about contribution to pension scheme, Munyandekwe said that the 6 per cent employee’s gross salary contribution which consists of 3% covered by the employee and 2% provided by the employer, is smaller compared to the region’s average of over 10%.
“The pension body ensures good management practices so as to make use of the little available funds. It makes investments aimed at long-term based profits,” he said citing mortgage as one of strategic long-term investments.
However, he said that an actuarial study that assessed the state of pension scheme in 2017 indicated that it will be sustainable for the next 20 years if the current trends remain stable.
“Increased economic activity results in job creation, especially for young people, and increased contributors to the scheme. This development, coupled with proper management of contributor’s money, makes social security system successful and sustainable.”
There are about 600,000 people in the workforce contributing to pension scheme, providing about Rwf75 billion contributions annually, according to statistics from RSSB.
Of these funds, about Rwf20 billion pension was given per year before the latest increment, or 1.7 billion per month.
The current pension was based on the law of August 24, 1974 governing pension scheme.
Munyandekwe said that the next actuarial study to consider pension increment will be carried out ion 2021/2022 in compliance with the law governing the organisation of pension schemes which was enacted in 2015.