Old Age Pension
The main objective of the Retirement Pension is to guarantee income security to elderly members by providing periodic payments.
Qualifying Conditions
- Attainment of compulsory pensionable age of 60 or early retirement at 55 – 59 years.
- Must have made at least 180 monthly contributions to the Fund. The ILO Social Security convention No 102 of 1952 (Minimum Standards Convention) stipulates a maximum qualifying period of 30 years of contributions. However, under the NSSF the qualifying period has been set at 15 years or 180 months.
- The ILO convention sets transitional provisions to persons termed “late age entrants” to receive basic pension for shorter qualifying periods as indicated below:
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Conversion Formula
NSSF applies the following conversion formula to convert the member’s NPF balance as at June 1998 into NSSF credits.
N = 1.5*B/C
Where: B = Member’s Balance as at 30/6/1998
C = Last contribution before July 1998
1.5 = conversion factor
If N is greater than 108, (108 is the number of contributions since July 1989
when the rate of 20% started), then:-
N1 = 108 + (N -108)
2
Then add contributions after June 30, 1998
Purpose of the Conversion formula
- To obtain pension credits for founder members of NSSF
- To adjust the variations of contribution rates
- Takes care of the effects of infl ation by applying the 1.5 factor
Old Age/Retirement Pension Formula
Pension = [1/600*180+0.015(N - 15)]*AIME
Where: N = complete years of service period (contribution period)
AIME = Average Insurable Monthly Earning ( Average Monthly Earning/salary of the last best 5 years)
Benefits Payable
Monthly pensions for qualifying members
- Initial lump sum paid immediately before starting pension which is equal to the calculated monthly pension times 24 months
- Old Age Special Lumpsum for non qualifying members i.e. the last contribution times number of credits. Minimum pension is 80% of the statutory minimum wage.
- Maximum pension is 67.5% of the average insurable monthly earning
Worked example
The following is an example to determine Old Age Pension for Mzee Mwendapole.
1. Assume Mzee Mwendapole has qualified for old age pension with the following data;
- Average Monthly Earning of TZS 120,000
- Credits as at retirement 180
- Applicable Percentage 30%
- Calculated monthly pension is 120,000*30% = Tsh 36,000. Since the calculate pension is below minimum pension Mzee Pole’s monthly pension shall be 80% of the existing minimum wage i.e. Tshs 80,000 instead of his Tshs 36,000
- His initial lumpsum shall be 36,000*24 = Tshs 864,000
2. Assume Mzee Mwendapole had Average Monthly Earning of Tshs 360,000 then his monthly pension would be 360,000 x 30% = Tshs 108,000 and his initial lumpsum would be 108,000 x 24 = Tshs 2,592,000
3. Assume again Mzee Mwendapole had attained 240 credits then his applicable percentage shall be 30% + (1.5%*5 years) = 37.5%. Hence his monthly pension would have been Tshs 120,000 x 37.5% = 45,000 (for assumption 1 above which is still below minimum pension) and Tshs 360,000 * 37.5% = 135,000 (for assumption 2 above). His initial lumpsum would be Tshs 1,080,000 for assumption 1 and Tshs 3,240,000 for assumption 2.
4. If Mzee Mwendapole had retired at the age between 55 – 59 years his applicable percentage for pension is reduced by 0.5% for every year retired before 60 years and his calculated pension MUST be above minimum. Assume he retired at the age of 56 years, he shall not qualify for pension for assumption 1 but his shall qualify for reduced pension for assumption 2 and 3 above. His reduced pension shall be Tshs 360,000 * (30% - 2%) = Tshs 100,800 for assumption 2 and Tshs 360,000 * (37.5% - 2%) = Tshs 127,800 for assumption 3. His initial lumpsum shall be Tshs 2,419,200 for assumption 2 and Tshs 3,067,200 for assumption 3