For the past months, the world has been feeling the detrimental impact of the COVID-19 pandemic.
The sudden changes pose a threat to many people’s financial well-being and a potential setback for their future plans.
In Rwanda, tangible social security policies are in place and have contributed to enhanced livelihoods.
Through Rwanda Social Security Board (RSSB) people are able to access old-age pension (retirement) among other packages such as anticipated pension, old age lump-sum benefits, survivors’ lump-sum benefits, invalidity pension, and survivors’ pension.
But for people to utilise these services, a certain contribution has to be made from an income.
And now with a setback of economic activities, the pandemic has the potential to disrupt future retirement security.
Yvonne Mujawabega, the Head of Pension department at RSSB, says that COVID-19 has negatively impacted the economy, noting that the loss of jobs by employees also negatively impacts RSSB’s undertakings.
“Loss of jobs directly leads to non- payment of contributions which is the principal source of financing of the pension scheme and unexpected or unplanned demands for pensions can also increase,” she says.
Finance expert Steven Tushabe notes that investment markets have been extremely unstable, many have experienced a decline and this poses ripple effects towards retirement.
He explains that this situation has impacted young employees more who were just starting to save with social security funds because then they cannot rely on it as much.
“This is the time to learn from the current events and start taking retirement planning seriously. A shift will definitely be needed in the retirement planning process, finances can be shifted to other investment plans that give a return for example real estate investment for rental income or in hotels,” he says.
He advises the youth to always plan ahead by holding fixed deposit accounts for interest and starting up personal businesses that they can run for profits even in such times for example agriculture investment.
Africain Biraboneye, Deputy Secretary-General of Rwanda Workers’ Trade Union Confederation (CESTRAR) says the effects of COVID-19 will continue manifesting however at a time like this, retirees are among the most secured people than those who are still in the workforce.
“In terms of challenges caused by coronavirus, I haven’t seen many for those who are already in retirement especially in terms of income for they are receiving their money for pension and are not on pressure of being fired from jobs like those in the workforce,” he says.
He however adds that one can never underestimate pandemic disruptions even with pension payments.
“Effects of COVID-19 could lead to changes in terms of operations or the mind-set.”
Biraboneye hence recommends that pensioners be availed with special packages that would help them make side investments other than wait on a stipulated income.
Revision of policies
In order to accelerate economic recovery in the face of COVID-19 and reduce its crippling effects and fear about what the future holds, addressing pension challenges should be part of the response.
Writer Monique Morrissey notes that deficit-financed stimulus spending—needed to quickly bring the economy back to something approaching full employment—will help but not ensure broad-based prosperity.
Policymakers also need to address power imbalances between employers and workers and target policies at disadvantaged workers, including unemployed older workers.
She also connotes the need to consider policies to encourage employers to hire long-term unemployed workers.
She adds that instituting fair-hiring policies for formerly incarcerated people re-entering the labour market as well as protecting and expanding disability insurance and other social insurance programs could be effective.
Biraboneye says the Government has the best strategy to control the pandemic adding however that addressing possible effects could call for revision of certain policies.
“We know the economy will not be the same for some time and no one knows how long this is going to take. Because of the situation some employers will reduce employees and when they do, of course, they will start with underperformers but will also consider those in old age. This is why we think years for retirement should be revised and go down like how it was to 55 and 60,” he says.
He says this will make those in that age bracket retire and this will reduce the number of unemployment cases.
“I say this as a workers’ representative but there is also the issue of sustainability on the side of the responsible parties that needs to be taken into consideration.”
On this note, Mujawabega highlights that parametric changes like revision of the retirement age are determined scientifically through periodical actuarial studies.
These studies mainly measure the impact of such changes on the long term financial sustainability of the scheme.
“Changes in the law regarding such matters are done (or not) based on actuarial valuation recommendations derived from the results of the valuation.”Follow https://twitter.com/DonahMbabazi