Retirement Benefits Who May Receive a Retirement Pension?
Subject to meeting all relevant conditions, a member may qualify for either a standard retirement pension or or the early retirement pension depending on his age, work record and choice.
A member who was bellow the age of 39 years on 1st February 2000 is eligible for a standard retirement pension if he has reached the age of 55 years and has made the minimum of 180 monthly contributions or if he is above 39 years, he had made the required number of contributions under the sliding scale.
A member is eligible for an early retirement pension if he is within five years of reaching 55 years and has made the minimum 180 monthly contribution. An early retirement pension needs to be above the minimum pension set at 20% of Nation Average Earnings or else the Director General will turn down a member’s application for early retirement.
How Much is a Standard Retirement Pension?
A retirement pension is calculated on the earnings record of a member.
Since nominal earnings have changed substantially over time as a result of inflation, NAPSA adjusts a member’s past earnings (subject to ceiling) to bring them in line with current earnings before calculating his pension.
This adjustment is made to ensure that the units used to express a member’s monthly pension stands roughly the same in relation to current national average earnings as the units used to express his earnings in earlier working years stood to national earnings in the years when they were earned.
If no changes took place in national average earnings the member’s average indexed monthly earnings would simply be the average of his monthly earnings for all the months in which he contributed to the scheme. Since such changes have taken place, the member’s earnings in each month of pensionable employment are adjusted to reflect the increase in average earnings.
In arriving at the Average Indexed Monthly Earnings the Authority carries out the following:
1. It first computes the relation of the National Average Earnings in each of the member’s past contribution months to the National Average Earnings to the time frame of the member’s retirement by dividing National Average Earnings in the member’s reference quarter by National Average monthly Earnings in each member’s contribution months. The member’s reference is the most recent quarter concluded not less than sixty days before the day on which the member applies for the benefit.
2. The Authority then multiplies the member’s earnings in each contribution period by the corresponding indexing ratio derived above. This yields the employee’s indexed earnings for that month.
3. The indexed earnings are then summed up and divided by the number of months pensionable employment. This average yields the member’s Average Indexed Monthly earnings (AIME).
The monthly pensionable is then calculated as:
Pension = AIME x 0.111 X m
Where m = months of pensionable employment
This is also called the General Insurance Rate (G).
How Will the Pension be Adjusted for Inflation?
Generally all pensions, whether retirement, invalidity or survivors are adjusted annually to reflect changes in National Average Earnings. All such adjustments will be effective January every year.
The Authority shall compute a pension adjustment quotient by dividing national average monthly earnings for the second quarter of the year by the corresponding average for the same quarter one year earlier. The Authority will then multiply this quotient by the pension a member was due to receive as at December 31 prior to the adjustment.
Example: suppose towards the end of the year 2005 we wish to calculate the pension that will be paid to a certain pensioner beginning in January 2006. First the Authority shall calculate the 2005 pension adjustment quotient that shows how national average monthly earnings changed from 2004 to 2005. To do this, the Authority shall divide national average monthly earnings for the second quarter of 2005 by the corresponding average for the second quarter of 2004. This division gives the 20005 pension adjustment quotient.
The pension to be paid to the pensioner in January 2006 will be the pension he was due to receive in December 2005 multiplied by 2005 adjustment quotient.
When Shall a Pension be Payable?
Any pension which NAPSA is obliged to pay under these regulations shall be paid monthly, retroactive to the date the beneficiary became eligible or to the date six months prior to the date of the claim, whichever is the more recent of the two dates. The Authority shall cease payment in the month in which the beneficiaries’ entitlement ceases or in the month following the month in which he dies if he remains entitled.
A beneficiary may not receive more than one pension at a time.
Where a member elects to receive his/her pensions abroad, that pension shall duly be payable if and agreement of understanding exists between the Government of Zambia and the Government of any other country.
If such an agreement does not exist, the pension shall be payable in Zambia to a person or bank appointed by the beneficiary
How Much is the Early Retirement Pension?
The monthly pension for an early retirement shall be computed using the formula.
P = P-0.005 (M) P
Where Pe = early retirement pension
P = standard pension or G (General Insurance Rate)
M Number of months from date of normal retirement
SLIDING SCALE
Age at 1/02/2000 No. of Months Required
39 168
40 156
41 144
42 132
43 120
44 108
45 96
46 84
47 72
48 60
What should be submitted at the time of making a claim?
1. Member must complete an NPS Claim Form
2. Member should also submit a certified copy of National Registration Card
3. Member should also produce letter of retirement
4. Retirement pension is a monthly life payment to a member
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Retirement Pension
