A new Pension Law, passed by the Senate last week, will give managers of pension schemes the powers to increase both contributions to the schemes and pension benefits for pensioners.
Under the new law governing the organisation of pension schemes, the public entity in charge of pension schemes will carry out an ‘actuarial study’ at least every five years and results from the study would determine whether to increase pension benefits or contributions.
“Where the actuarial study shows a possible negative impact on the economy, the amount of contributions will be increased according to the provisions of Article 8 of this law. Basing on the findings of the actuarial study provided under the preceding paragraph, pension benefits may also be increased,” Article 16 of the law reads in part.
The law says that a Presidential Order will determine related implementation modalities for the above changes.
The changes to the law might sound plausible, but some pensioners have criticised the flexibility put on the way pensioners’ benefits can be increased.
‘Times have changed’
Modest Munyuzangabo, the president of the Rwanda Pensioners’ Association, said the law is non-committal with regards to increasing benefits for pensioners.
“What if managers of pension schemes don’t manage them well? The review of the performance of pension schemes can happen any time without waiting for five years. As you can see, the law didn’t specify what would be increased on pensioners’ benefits after every given years,” he said.
Munyuzangabo and other pensioners have been mounting pressure on the government to increase pensioners’ benefits since the current pay is no longer enough because of how things have changed over the years.
As debate on new Pension Bill continued in Parliament, growing calls among the pensioners to raise benefits raged on. The pensioners have complained about what they call peanut benefits, with some of them collecting as little as Rwf5,000 per month.
“People need to understand that the value for houses we built when we were young and working has changed, why not change the pensioners’ benefits to the current situation? What is contained in Article 16 is just a trick to avoid increasing pension benefits because they never said what would be the increase after any given years. In some countries the pension pay is increased every two years,” Munyuzangabo said.
While pensioners like Munyuzangabo regret that the way pension benefits are increased was not clearly put in the law, some lawmakers say the law is reasonable.
Senator Thérèse Kagoyire Bishagara heads the senatorial Standing Committee on Social Affairs, Human Rights and Petitions, which conducted the analysis of the Pension Bill on behalf of the Senate.
“It is an important law which responds to some of the questions that people have asked,” she told The New Times on Monday.
Among other new changes that the new pension law has brought include the minimum retirement age, which was shifted from 55 years to 60 years, the removal of the time limit of 10 years within which the right to claim pension benefits was held, and the regulation of the voluntary pension scheme as opposed to the mandatory pension scheme.
l The minimum retirement age increased from 55 to 60 years.
l The declaration of contributions to mandatory pension scheme will now be done on a monthly basis (instead of a quarterly basis).
l The amount of old age pension benefits will be computed basing on the total average monthly earnings received for the last five years (instead of three of five years).
l The right to pension benefits is no longer subject to statutory limitations for the insured (time limit of 10 years was removed).
l The law includes the regulation of the voluntary pension scheme.
l The law provides that the public entity in charge of pension schemes shall conduct an Actuarial study at least every five years. Where the study shows a possible negative impact on the economy the amount of contributions shall be increased according to the law; basing on the actuarial findings pension benefits may also be increased.
l The right to membership to a mandatory pension scheme was also extended to self-employed not aged above 50 years.