Get serious on pension reform

It emerged this week that the government is plotting a fresh, contributory pension scheme for civil servants. In the place of the existing scheme where permanent and pensionable civil servants work until retirement and then have the government foot the entire budget for their pension and gratuity, under the new arrangement the employee will pay five per cent out of his/her salary and the government will top up by 10 per cent.

If implemented, civil servants will have 15 per cent of the gross salary go towards their pension per month, just like those who contribute to the National Social Security Fund (NSSF).
Adopting this arrangement would entail some complexity, particularly having to first clear existing civil servants or to compute their accrued pensions and transfer the money to a fund that would have to be created. The other option would be to say that the existing civil servants continue with the current arrangement until retirement, with the proposed approach only affecting new recruits.

Our considered opinion is that moving to a contributory pension scheme for civil servants would be a good thing, especially since it would relieve the government of the burden of having to fund pension payments from the Budget, which has led to immense pension arrears over the years.
And while at it, it is important to underline that there has been too much talk about pension reform for a long time, and no action. For those who contribute to NSSF, the government has dragged its feet for too long about amending the NSSF Act in order to provide for certain things.
For instance, it has been said for a long time now that waiting for contributors to clock 55 years of age before they may access their savings is not the best way to approach the matter. At 55, the argument goes, many of the savers would have lost much of their physical and emotional energies and will be unable to productively utilise their savings.

And there have been many stories of retired individuals who get their life-time contributions, only to squander it. There may be many reasons for this, but one of the reasons is that such people would perhaps be trying to invest at that scale for the first time and may in the process get overwhelmed. Sadly, the price of one squandering their life-long savings after 55 years of age may most of the time mean that that person is condemned to lifelong suffering.
Suggestions like mid-term access to part of one’s savings and such like need to be adopted. Reforming this sector needs to move from mere talk to action. That will save many people immense agony.