The Africa Centre for Retirement Research (ACRR) has called for an increase in the Social Security and Insurance Trust (SSNIT) contribution to 17.4 percent from 11 percent to help sustain the scheme.
In a report, the group pointed out that SSNIT’s reserves are projected to deplete by 2037, but could be averted by increasing the contribution rate.
The Research suggests that the increasing gap between the Scheme’s income rate and the cost rate, year on year, indicates financing shortfalls.
In effect, it maintained that the recommended contribution rate necessary to sustain the scheme for future generations is projected to increase from 12.3 percent in 2018 to reach a level of around 17.4 percent in the next three decades.
Speaking at the press briefing on the matter, the Executive Director for the ACRR, Abdallah Mashud indicated that in the short-term policymakers must safeguard the sustainability of the Scheme reserves, which is depleting rapidly.
“To address social security financing imbalance and avoid a collapse of the pension system, a number of policy options are available to Parliament and Policymakers, such as increasing the contribution rate from the current 11 percent to the rate recommended by the actuarial valuation reports,” the executive director said.
The level of fund reserves measures the scheme’s ability to pay benefits to current and future beneficiaries. The rate of growth in the reserve generally follows the development of the income and expenditure pattern.
According to the ACRR, the 2008 pension reforms, which established a 3-tier contributory pension system, introduced substantial financial imbalance between the scheme’s assets and the corresponding liabilities, thus certainly questioning the future solvency of the Basic National Social Security Scheme.
Suggesting the ideal option, Mr. Mashud noted: “As it stands, adjusting the contribution rate appears to be the ideal option because increasing retirement age will offer little impact and benefit cuts is not an option we would want to discuss.”
The option of increasing contribution rate is expected to affect all covered workers, however, with this, lawmakers are urged to address the sustainability challenges in a timely manner by phasing in the necessary parametric and legislative changes gradually and giving employers, workers and beneficiaries enough time to adjust to the changes.
“There is the need to begin to plan for an increase in contribution rate in the short term to avoid a rapid depletion of the Scheme Reserves and to make the scheme more sustainable for future generations,” Mr. Mashud said.