Retirement Age In Zambia

The labour movement does not support the government’s intentions to adjust the retirement age from 55 to 65.
Zambia Congress of Trade Unions president Leonard Hikaumba says they are opposed to the proposed retirement age adjustment because the life expectancy in the country is 50, and many workers could die before reaching retirement age.
The labour movement is also opposed to the government’s plan to start paying pension benefits in monthly instalments. They say this will negatively affected workers, especially those that have not had any opportunity to invest or own a house during their working life, arguing that “a lump sum approach provides members with resources to invest, purchase or build a house”.
These days many Zambians, whether in employment or not, are tuned to discussions about the retirement age. A consideration regularly discussed is increasing the retirement age from 55 to 65 and how it relates to the average life expectancy of Zambians.
It is not in dispute that our life expectancy over the last few years has increased from 37 to 50. And with this upward trend, those in government are trying to tick up the retirement age. Zambians are today living longer than they did in the last two decades. However, for many, this means living longer on fewer resources.
There is extensive discussion about the fiscal implications of delayed retirement for workers who may or may not be in a position to do so. Of course, for some, it’s not about a choice to retire early. A number of workers simply cannot continue to work in their 60s due to physical constraints and health conditions.
So, what is important is all Zambians to retire in dignity. And the challenge is to arrive at the optimal retirement age.
If you are going to do it – retire, that is – you might as well do it at the right age. And doing it at the right age involves a bit of homework.
Retiring at the optimal age should not be left to chance. Rather, choosing a retirement age needs to be a rational decision that accounts for a variety of confusing and competing considerations.
There is need to consider the financial feasibility of retiring, a would-be retiree’s ability to continue working, the psychological factors surrounding the retirement decision, and the would-be retiree’s personal situations.
There would also be need to determine how much money one will get in retirement from all available sources – pensions, social security, retirement accounts, work and the like. If this doesn’t give one the desired lifestyle given whatever withdrawal strategy one plans to use, there may be need to consider not retiring. Not retiring when you don’t have enough income to support your desired lifestyle isn’t necessarily a bad thing, by the way. Also, it’s quite possible that if you don’t have the income to maintain your lifestyle in retirement, you should critically examine other factors before you make your decision.
Not retiring preserves your assets; it gives you a chance to keep building your nest egg; it shortens the period of time you will be drawing down your assets; and it increases the monthly income you will get from social security, provided you delay claiming it.
There is also need to consider all the risks that you might face in retirement and how you will mitigate those risks, be it the risk of outliving your assets, inflation or the sequence of return risk. If you haven’t addressed those risks, you might consider not retiring until you do.
If you have a lot of debt, especially mortgage debt, as you head into retirement, it could affect your ability to increase the amount of money you save for retirement. Once more, you shouldn’t retire if you don’t have sufficient income to service your debt, especially if you have a home equity loan that converts from interest only payments to principal – and – interest payment while you are in retirement.
There is need also to examine the earnings prospects if you are to remain employed. What do you stand to earn if you keep working, versus the joy you would get from being retired and enjoying a life of leisure? That’s the trade-off that must be evaluated. Significant opportunity cost reduces the probability of retiring. If you stand to earn a significant salary by working, you are more likely to keep working. Of course, working might also increase the desire to retire.
Assess whether you are or you will be healthy enough to continue working. If you are not in good health, you may have to retire involuntarily, and it’s unlikely to be at your optimal retirement age. This is something that you might have to factor into your plans or your possible scenarios.

But all this entails that workers have a choice of when to retire. If the government wants to raise the retirement age from 55 to 65, given the discourse that has gone on, there may be need for a system that is more flexible and that gives workers some reasonable options of when to retire.
It may also be necessary for the labour movement to do a bit more work on this issue. For instance, some of the reasons they are advancing are not strong enough to support their opposition to the raising of the retirement age to 65. The life expectancy of 50 cannot provide a good reason for opposing the raising of the retirement to 65. The life expectancy in Zambia is improving and following their logic, this necessitates the raising of the retirement age.
And on the labour movement’s opposition to the government’s plans to start paying pension benefits in monthly instalments, our view is that their opposition to this is also not well reasoned. They say their members will need a lump sum payment so that they can “invest, purchase or build a house” if they had no opportunity to do so during their working life. Investing retirement benefits into a house may not be a prudent thing. As we have pointed out above, if one still doesn’t have a house, one should consider continuing to work. Retirement benefits are not for investing in a house. These benefits are for the retiree to live on for the remaining years of his or her life.
We have many cases of retirees who have sunk all their retirement benefits into concrete, into a slab of a house that they cannot finish. And they have a challenge of how to get their money out of that concrete. At the point of retirement, a worker should have where to go, a house to live in. Trying to build or purchase a house after retirement is a recipe for a troubled retirement.
However, we are apprehensive about the government’s ability to pay retirees monthly benefits. We don’t think the capacity is there to reach all retirees in time wherever they may be located. Already, the current system has pushed a very high cost on retirees of travelling to Lusaka to try and get their benefits. This may just result in high monthly travel costs for the retirees in pursuit of their payments. Unless the government can guarantee the retirees an efficient, effective and orderly system of monthly payments, such a system should not be put in place for now.

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Posted by Editor on August 31, 2013. Filed under LATEST NEWS. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry