SUSTAINABLE INSTRUMENTS TO MOVE TOWARDS UNIVERSAL COVERAGE- THE CASE OF ZAMBIA Yollard Kachinda – Director Contributions & Benefits National Pension Scheme Authority- (NAPSA )

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, Zambia- Basic Statistics Population ( Millions)12.1 GDP Average growth rate (2000 – 2009)6 % Labour Force (Millions)6.2 Labour Force Participation Rate (%)76 Total Employment (Millions)4.7 Formal Sector Employment (% of Labour Force)10 %

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 The Social Security System SCHEMESCHEM E TYPE SECTORS COVEREDMEMBER SHIP National Pension Scheme Authority (NAPSA) DBAll Sectors (from 1 st February, 2000) 496,000 Public Service Pension Fund (PSPF) DBPublic Service (Closed group from 1 st February 2000) 90,000 Local Authorities Superannuation Fund (LASF) DBLocal authorities (Closed group from 1 st February, 2000) 13,000 Occupational SchemesDB/DCPublic & Private Sectors (Supplementary to NAPSA) 43,000 3

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 NATIONAL PENSION SCHEME AUTHORITY SUMMARY OF BENEFITS Normal Retirement Pension Payable from Age 55 Minimum 180 monthly contributions Retirement lump sum Less than 180 monthly contributions Refund of indexed contributions Invalidity PensionPermanent invalidity, 60 contributions Lump sum also paid Survivors Pension Pension Lump sum Automatic adjustment of pensionsEach January in line with NAE Funeral grant10 times the minimum pension 4

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 FINANCING PROVISIONS Resource Mobilization Contributory Contribution Rate 10% Who Pays and How much?Employers (5%) / Workers (5%) Wage Ceiling4 X National Average Earnings (NAE) Wage Ceiling AdjustmentAnnual Automatic Adjustment 5

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 FINANCING SYSTEM Scheme Partially Funded (Scaled Premium System) Main Assumptions (Due to insufficient experience)  Short contributory records  Long contributory records Plan for progressive annual adjustment of contribution rate (2012 – 2031) Lump sums versus pensions 6

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 MAKING ASSUMPTIONS WITH LIMITED DATA AVAILABLE 1.Density of Contributions Award of lump sum or pension Short records scenario (more lump sums) Long records scenario (more pensions) 2.Demographic assumptions -Aids Mortality Effect of mortality rates below retirement age Aids mortality Without Aids mortality 3.Demographic assumptions - Pensioner mortality Impact of Aids on pensioner mortality Mortality rates improve by 1% per year (UK) Variants for 0% and 1.5% 4.Family situation - Survivors benefits Survivors pension paid to spouse Wives three years younger than husbands Proportion of members with survivor rises from 0% at age 16 to 100% from age 35 to 55 7

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 Progressive adjustment of the contribution Rate to

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 DEALING WITH CONTRIBUTION EVASION 9 CASE/ INCIDENCE OF CONTRIBUTION EVASION REQUIRED ACTION 1. Non registration of employees by employersInspections/Prosecutions 2. Non remittance of contributions by employers Inspections/Penalty/Prose cutions/statements to workers 3. Declaration of false wagesInspections/Prosecutions 4. Delayed remittance of contributionsPenalty/prosecutions 5. Deliberate non enrollment by self employedInformation dissemination

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 INCENTIVES TO MINIMISE CONTRIBUTION EVASION  Benefit directly linked to contributions amount ( Contribution history)  Number of contributions determine type of benefit (Lump sum or pension)  Survivors pension/lump sum limited to entitlement of primary beneficiary  Minimum pension provision not applicable in case of low pensions where there are more than one survivor. 10

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 IMPACT OF THE MINIMUM PENSION GUARANTEE (1) Automatic adjustment to minimum pension Minimum pension = 20% NAE NAE (2010) = ZMK2,173,713 (US$467) Minimum pension = ZMK434,743 (US$ 96) Minimum wage = ZMK268,000 (US$ 60) 11

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 IMPACT OF THE MINIMUM PENSION GUARANTEE (2) 12

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 TOOLS TO HELP IMPROVE SOCIAL SECURITY COVERAGE Voluntary membership – Self employed Flexible contributions provisions DC component – self employed Short term benefits (Health, lump sum e.t.c) Special scheme for coverage of specific groups Cash transfer scheme 13

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 TOOLS TO HELP IMPROVE SOCIAL SECURITY COVERAGE- THE CASH TRANSFER SCHEME This is a social assistance scheme Started as pilot project (2003, with 3,500 households) Poor households in rural districts Expanded to 8,000 households, 4,000 above age 65 Benefit amount = ZMK 120,000 (US$25) Financing- 80% cooperating partners and 20% Govt. Targeted to scale up to 14,000 households by year cooperation agreement – 38 million Pound Sterling Main issue is sustainability. 14

Technical Seminar of the ISSA Technical Commission of Statistical, Actuarial and Financial Studies Montevideo, Uruguay. –April 27-28, 2010 Thank You 15