PENSIONS NOTES BY CONSULTANT- MR REYNOLD MARINDA

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- CONSULTANT/ LECTURER: MR R. MARINDA
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DEF: pensions is a savings plan whereby persons cover themselves from undesirable occurrences
that may arise. It is an allowable deduction under the Income Tax Act 23.06

TYPES OF PENSIONS

1. Defined Contribution Pension- this scheme is also known as Purchase Pension Scheme or
Provident Fund. Employer and employee contribute clearly defined contributions. The
benefits and contributions may be paid as a lump sum or periodic payment.
2. Defined Benefit Scheme- benefits to be paid to a beneficiary are known from the onset.
Both member and employer may contribute to the scheme and there is a minimum value
that can be paid to the beneficiary. Benefits can be paid in the form of a lump sum or
periodic payments.

CONDITIONS UNDER WHICH ONE CLAIMS THE PENSION

1. When one has reached normal retirement age as per the rules of the pension fund.
2. When you have resigned or have been dismissed (you receive your own contributions, while
the employer contributions are preserved until you reach retirement age or up to your
death)
3. When you have retired early.
4. When you leave employment for medical reasons.
5. When the fund member dies and you are a beneficiary.

PENSION AND RETIREMENT ANNUITY FUND

- A tax relief is granted for contributions made to a pensions fund or retirement annuity fund.
- Contributions made to an unapproved or non-registered funds are non-deductible.
- Pensions are regulated by I.P.E.C which falls under the Ministry Of Finance and they must be
registered in terms of The Pensions And Provident Act 24.09
- A pensions fund must be registered or provisionally be registered as a pension or retirement
annuity fund under the Pensions and Provident Act if it is established by any law for the
 purpose of providing amongst other things Annuities or Pensions on Super Annuities or
Retirement.
- Certain organisations offer Personal Private Pension or Annuity Schemes where members of
the public, employers or individuals can contribute or buy into, e.g. Old Mutual, Minerva,
Fidelity, Cormaton etc.
- Industry specific pension funds also exist e.g. M.I.P.F, Local Authorities Pension Fund,
Communications Industry Pension Fund, and Construction Industry Pension Fund.

PENSIONS CONTRIBUTIONS

- A member can deduct contributions to a pension fund and they are tax deductible.
- A member is an employee, a self-employed or a partner allowed to deduct the contributions
made by him or her to a pension fund or a consolidated revenue fund.
- The contributions are limited to ZW 390 000 or USD 3000

Example: Mr Brian is a manager at ABT Ltd and is earning $230 000/month. He contributes 15% of
his salary to a pension fund.

Required: Calculate Mr Brian’s

MANDATORY PENSION

The government of Zimbabwe instituted a social benefit scheme/ structure in 1994 which offered
coverage to employees and their beneficiaries. The two schemes are namely

1. Pensions and Other Benefits Scheme

2. Accident Prevention and Workers Compensation Scheme.

They were enacted as social security schemes in Zimbabwe. The (NSSA) National social Security
Authority manages the two schemes in Zimbabwe. The schemes are compulsory and all employees
should contribute to NSSA. There are schemes that currently under consideration. That is The
National Health Insurance Scheme and extending the social security to the informal sector.

REGISTRATION AND COMPLIANCE TO NSSA

Registration to the schemes is compulsory. The employer complete Employer Form P2, while the
employee completes Employee Form P3 for registration of both schemes.

NSSA then notifies the employer of their employer code (E C) and the employee with SSR Number
(social security registration number). The numbers are to be quoted on all communications with
NSSA by both the employer and employee. The employee’s SSR is to be used for a life time even
when employee moves from one employer to another.

NOTIFICATION OF CHANGES

Employers must inform NSSA of any changes that may occur in writing within one month of such
changes. The changes include:

- Change of address
- Change of business name
- Any closure of business or branch of business
 - Ceasing to be an employer
- Resuming to be an employer
- Commencement of business/enterprise
- Opening of a new branch

PENSIONS AND OTHER BENEFITS SCHEME

- The scheme is popularly known as N.P.S

- The main objectives of the scheme is to provide cash benefits to insured persons during
periods of income stoppages due to retirements, invalidity and death.
- It is administered in terms of S.I 393 of 1993.

WHO IS COVERED?

- The scheme covers every working Zimbabwean between the ages of 16 to 65 years.
- Zimbabwean citizens who are either employees in Zimbabwe or outside Zimbabwe as a
continuation of insurable employment in Zimbabwe.
- Civil servants

EXEMPTIONS OF THE SCHEME

- Non Zimbabwean citizens who are not ordinarily resident in Zimbabwe

- Diplomatic staff, who are non-Zimbabweans
- Domestic workers
- Casual workers- employees contracted for periods less than 18 days in a month do not
contribute to the scheme.
- Where you have casual workers who work for 5 days in a month but the contract runs for
several months, the employees are supposed to contribute as they are deemed to have fixed
contracts of employment. The periods worked will be aggregated to qualify for a benefit.

FUNDING OF THE SCHEME

The rate of 4.5% from employer and 4.5% from employee is calculated up to a maximum of the total
consumption poverty datum line (TCDL). Where the TLDC is not available or not published, the last
published figure remains applicable. NSSA will publish the monthly insurable earnings applicable
every month by the 1st of each month on the NSSA website.

Example: P Tafirenyika is the HR Consultant for OMV Engineering and is calculating the NSSA
contributions for the following employees.

a. Employee A- $140 000

b. Employee B- $98 000
c. Employee C- $42 000
d. Employee D- $85 000

Required: Assuming a NSSA threshold of $90 000, calculate the total amount owing to NSSA from the
four stated employees.
BENEFITS OF PENSION AND OTHER BENEFITS SCHEME

- Benefits under the scheme are paid out either as a grant or pension.
- Grant is a once off payment to a contributor, who has contributed to NSSA for the past 12
months but less than 10 years.
- A pension is a lifetime monthly pay-out to a contributor who has contributed to NSSA for 10
years of more therefore are long and short term benefits.

RETIREMENT BENEFIT (GRANT/PENSION)

- This is a pay out to a person who has reached 55 years of arduous/strenuous occupation, 60
years normal retirement and 65 years late retirement. The benefit is paid as a grant. If
contribution period is less than 120 months.

INVALIDITY BENEFIT (GRANT/PENSION)

- It is a payment paid to a member who has become permanently incapacitated to continue

working due to illness or injury.
- The injury must be medically certified and the injured member must be below the age of 60
years.
- Payment ceases when member fully recovers.
- Contribution period should be at least 6 months if the benefit is to be paid as a grant.

SURVIVORS BENEFIT (GRANT/PENSION)

- This is a benefit paid out to survivors in the case of death of a member.

- The benefit can be claimed by a widow or widower, children of the contributor, parents of
the deceased or any other dependents.
- The benefit is paid in order of priority as outlined.
- If the survivors are children, and they are below 18 years or below 25 years in full time
education or permanently disabled and incapable of supporting themselves despite of their
age, they are given the children’s allowances.

FUNERAL GRANT/ ASSISTANCE

- This is a once off flat rate payable at death of a member who has contributed to the scheme
for at least 1 year.
- Benefit covers all workers regardless of the status of employment i.e. contract, seasonal or
permanent.

ACCIDENT PREVENTION AND COMPENSATION FUND

- It is contributed by the employer.

- It is a total percentage of the total wage bill.
- It also depend with industry sector
- Rates are given as per sector/industry and apply for a calendar year.
- It depends also with proneness to risks at work.
- It is not obvious that injury on duty grant will be paid- one has to have been injured at work,
doing what they were employed for, for them to be paid the injury on duty
benefit/compensation.