Is early access to pension benefits feasible?

Rwanda Social Security Board head office in Kigali. Members of the Parliament on Monday tabled a proposal to provide early access to pension benefits for employees who have lost jobs. / Sam Ngendahimana.

Members of the Parliament on Monday tabled a proposal to provide early access to pension benefits for employees who have lost jobs as a result of various circumstances such as restructuring or layoffs among other factors.

The MPs said the provision in the existing law, which stipulates that employees start getting pension benefits at the age of 60, threaten the lives of those who lose jobs early on.


The pension scheme is managed by the Rwanda Social Security Board (RSSB).


Some MPs have been arguing that employees should be allowed to take early retirement at 55, instead of the current 60 years of age.


Eric Quartey, the Chief Executive Officer of Axis Pensions Ltd Rwanda, a private pension scheme, says lawmakers are raising legitimate concerns but insists that such changes should be made carefully.

“This is because the RSSB scheme by design is a typical defined benefit scheme, hence some amount of actuarial valuations is required, to be able to know how well the RSSB scheme can handle such payouts,” he said.

The 2015 pension law provides that for a member of the social security scheme to access monthly old-age benefits (pension), he or she shall meet requirements including to have contributed to the pension scheme for at least 15 years.

The MPs pointed out that when a person loses occupation aged over 50, their likelihood to get another employment is very low given that institutions tend to consider relatively younger applicants in their recruitment process.

Even when the government decides to go ahead with the move, Quartey suggests the law should ensure that such persons that take advantage of the provision, do not engage in formal employment, else this provision is likely to be abused.

He believes such a decision to provide early access to pension benefits would see RSSB introduce a discounting factor for early retirees, which will result in early retirees receiving much lower benefit payouts than if they had waited.

“Given that, once you start enjoying your retirement early RSSB will have to pay you for a longer period of time, which means that early retirees might have to do with relatively smaller pensions,” he notes.

Gradual shift

Quartey indicates that worldwide there is a gradual shift from state-run defined contribution schemes to privately-managed defined contribution schemes, calling on lawmakers to encourage the uptake of private pensions in the country.

“This will have a long term benefit on the financial security of workers,” he argues.

The debate to review provision to allow early access to pension benefits is not new.

In 2018, MPs, Trade Unions and Association of Pensioners in Rwanda called for the reduction of the early retirement age cap from the current minimum of 60 years to 55 years, arguing it would allow elderly employees to retire while still relatively energetic.

Maurice Toroitich, the chief executive officer at Bank Populaire du Rwanda (part of Atlas Mara), doesn’t agree with the concept of giving early access to pension benefits.

“For me the idea that someone has lost a job is not a reason to start getting pension benefits, because the assumption is that even though you lost the job but at age 50 you can still do work,” he says.

Strain on financial system

Toroitich, the former chair of Stanbic Bank Pension and Life Assurance, highlights that the move to provide early benefits may also exert pressure on the nascent financial sector.

“If you start paying someone at age 50, it probably means you will be paying that person for 40 years as opposed to 20 years. This could put strain on the fund,” he says.

He argues that in a young society like Rwanda, you need pension funds to be long-term and that if you allow people to start utilising their funds, you are denying the financial sector the ability to raise long-term funds.

Generally, the pension sector has been on a growth trajectory.

Last year, total assets of the sector increased to Rwf936.5 billion in December 2019 from Rwf808.2 billion during the same period in 2018.

The sector is currently composed of one mandatory and occupational hazards scheme (RSSB), which accounts for 95 per cent of the pension total assets, as well as 12 licensed private pension schemes.

Private pension schemes account for 5 per cent of the pension total assets.

However, Regis Rugemanshuro, the Director General of RSSB indicates that Rwanda still has the lowest contribution rate in the region.

“RSSB is working on expanding the contribution base in order to improve the Pension scheme financial sustainability,” he says.

He reveals that RSSB kicked off an actuarial study a month ago to analyse the sustainability of the pension fund in order to propose some improvements where necessary.

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