Evaluation of Retirement Systems - Social Legislation - Lecture Slides, Slides of Introduction to Sociology

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Evaluation of Retirement Systems

of Countries within SADC

- OPM for FinMark Trust, DSD & ISSA

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Outline

• Background to the Study

• Methodology and Approach

• Review of Components by Country

• Challenges and Responses

• Conclusions

Africa and SADC

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15 Diverse Countries …

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HDI rank Country^

Total population

Urban population

Life expectancy at birth

GDP per capita

Population below income poverty line

Gini index

(millions) % of total (years) (PPP US$) $1.25 a day

2007 2010 2007 2007 2000- 57 Seychelles 0.1 55.3 ... 16,394 ... … 81 Mauritius 1.3 42.6 72.1 11,296 ... … 125 Botswana 1.9 61.1 53.4 13,604 31.2 61 128 Namibia 2.1 38.0 60.4 5,155 49.1 74. 129 South Africa 49.2 61.7 51.5 9,757 26.2 57. 142 Swaziland 1.2 25.5 45.3 4,789 62.9 50. 143 Angola 17.6 58.5 46.5 5,385 54.3 58. 145 Madagascar 18.6 30.2 59.9 932 67.8 47. 151 Tanzania (URT) 41.3 26.4 55.0 1,208 88.5 34. 156 Lesotho 2.0 26.9 44.9 1,541 43.4 52. 160 Malawi 14.4 19.8 52.4 761 73.9 39 164 Zambia 12.3 35.7 44.5 1,358 64.3 50. 172 Mozambique 21.9 38.4 47.8 802 74.7 47. 176 Congo (DRC) 62.5 35.2 47.6 298 59.2 44. 1012 Zimbabwe 12.4 38.3 43.4 ... ... 50. Source: United Nations, Human Development Report 2009

• Methodology and Approach

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Aims of the Study

“a comprehensive review of retirement systems and

informal mechanisms of all SADC countries”

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“describing the retirement systems of each country with

a view to understanding the effectiveness and

coverage in different systems and the importance of

informal approaches to long-term provision”

Five Components of a Retirement System

Criteria & components investigated:

• Formal
  • Legal and institutional set-up;
  • Coverage;
  • Financing (mechanism and quantum);
  • Quality (contingencies, benefits, protection of rights, sustainability and risks, reform initiatives)
• Informal:
  • long-term savings
  • asset accumulation
  • other informal support (kinship networks, community organisations)

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Social

Assistance

Social

Insurance

Civil Service

Occupational

Private

Occupational

and Voluntary

Informal

Systems

System Formal

• Review of Components by Country

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Social Pensions (Social Assistance)

Country Age eligibility

Universal/ Means Tested

No of beneficiaries

Coverage % of population over 60

Cost as % of Government Expenditure

Cost as % of GDP

% of age eligible

local cur. US $

Botswana 2009 65+ Universal 90,639 88% of 60+ P220 $31 5.4% 0.7% 0.3%

Lesotho 70+ Universal 80,000 86% M 300 $38 7.7% 3.6% 1.6%

Mauritius 2008 60+ Universal 136,408 104% Rs2,802 $100 9.0% 7.9% 1.8%

Namibia 60+ Universal 100,000 (2005) 85% N$ 450 $56 5.6% 0.8%

South Africa 2009/10 60+ Means Tested 2,534,082 68% R1,080 $135 7.5% 3.6% 1.2%

Swaziland 2009 60+ Means Tested 60,000 95% E 200 $25 6.2% 1.3% 0.6%

Amount paid (Monthly)

Angola DRC Madagascar Mauritius Mozambique Seychelles Swaziland Tanzania Zambia Zimbabwe

10 countries with National Social Insurance

Coverage is limited:

• Less than 10% of LF in

Madagascar, Tanzania &

Zambia

• ± 55% Mauritius ... because economic activity is largely based on the informal sector and subsistence agriculture

Low replacement rates of 30– 50%:

• Unlikely to maintain retirees at pre-retirement income
• Unlikely to keep retirees out of poverty at retirement

Issues:

• contribution rates low ± 10% of

salary

• administrative costs relatively

high; often ± 20% of annual

contributions

Issues:

• asset management policies = low returns on funds
• in many countries the benefits are paid as lump-sum on retirement not monthly income
• need to strengthen governance, asset management 14

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Occupational schemes - civil servants

Scheme Governance Legislation Angola No information available Botswana Botswana Public Officers PF Board of Trustees Provident and Pension Fund Act 1987 DRC No information available Lesotho Public Officers DC PF Pension Fund Secretariat Public Officers DC Pension Fund Act 2008 Madagascar Caisse Retraites Civiles et Militaires Ministry/Department Act 62-144 of 1962 Malawi Govt Public Pensions Schemes Board not clear

Mauritius Civil Service Pension Scheme Ministry/Department not available Mozambique not clear Ministry/Department Law on Functionaries/Agents of State, 2009 Namibia Government Institution PF Board of Trustees Pension Funds Act 1956 Seychelles None - National social insurance for all Seychellois South Africa Government Employees PF Board of Trustees Government Employees Pension Law of 1996 Swaziland Public Service PF Board Public Service Pension Order 1993 Tanzania Public Service PF not available Public Service Retirement Benefits Act no 2 1999 Zambia Public Service PF PSPF Board of Directors Public Service Pension Act 1996 Zimbabwe Pension scheme for civil servants Ministry/Department State Service Pensions Act 7 of 1989

PF = Pension Fund

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Occupational schemes - civil servants

Coverage

Employer Contribution

Member Contribution Type^ Funding^

Normal retirement age

Botswana All civil servants & the military 15% 5.00% DC 60 Lesotho All public officers 11.20% 5% DC 55 or 45 Madagascar Civil servants & the military^ 16%^ 4%^ not clear^ funded^ 55 or 60 Malawi Long term govt employees^ not clear^0 DB^ unfunded^60 Mauritius Central govt; separate for local & statutory bodies

20% of wage cost (2004)

0 DB unfunded 60

Mozambique Central, regional and local govt; some parastatls excluded

Balance required 7% DB unfunded 60 (men)/ (women)

Namibia All government and statutory institutions

16% 7% DB funded 60

South Africa All government employees excl. parastatal

13% 7.50% DB funded 60

Swaziland All government employees (from data we have)

15% 5% DB 75% funded 60

Tanzania Central govt; separate for local & statutory bodies

15% 10% not clear funded

Zambia Central government employees 7.25% 14.50% DB unfunded 60

Zimbabwe not clear^ not available^ not available^ DB^ unfunded

• Country classifications and issues

ILO classification of SADC social security systems

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Country Number of social security branches covered by a statutory programme/strict definition

Sickness Maternity Old age Invalidity Survivors Family allowances

Employment injury

Unemploy- ment

Angola … … … … … … … … None Lesotho … … … … … … … … None Botswana Very limited statutory provision/1 to 4 ^ ^ x None x x x ^ Congo, DRC Very limited statutory provision/1 to 5 ^ x x x x x x None Malawi Very limited statutory provision/1 to 4 None None None None None None x None Swaziland Very limited statutory provision/1 to 4 None None x x x None x None Zambia Very limited statutory provision/1 to 4 ~ None x x x None x None Zimbabwe Very limited statutory provision/1 to 4 None (^) ^ x x x None x None Mozambique Limited statutory provision/5 to 6 x x x x x None None None Mauritius Limited statutory provision/5 to 6 ^ ^ x x x x x x Tanzania, UR. Limited statutory provision/5 to 6 ~ x x x x None x ^ Madagascar Limited statutory provision/5 to 6 ^ x x x x x x None South Africa Semi-comprehensive/7 x x x x None x x x Namibia Semi-comprehensive/7 x x x x x x x None Seychelles Semi-comprehensive/7 x x x x x None x x

No information in source … Not available Very limited provision ^ Limited provision Limited provision ~ Only benefit in kind Semi-comprehensive x One programme at least Source: ILO 2010, World Social Security Report