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Rwanda plans two new savings schemes for pensioners

Friday April 29 2016
RT0427GAKENKE

Saving has been a challenge across the different age and economic segments of the population. PHOTO | CYRIL NDEGEYA

The Rwanda government is planning two new pension-like saving schemes by July to cover both the employed and the unemployed.

“We had to think of a saving scheme equivalent to Mutuelles de sante, so that the ordinary people, with or without an income can have savings when they grow old,” said Minister of Finance and Economic Planning Claver Gatete.

“People should have savings, if they don’t, they will be a burden to the government, so we better plan now,” he said.

Mutuelles de Sante is Rwanda’s social health insurance programme whose membership is voluntary and payment of premiums is based on economic status.

In its planning, the government envisions these long-term saving schemes running parallel to the original pension scheme.

“We are also introducing a scheme through which people save before they retire, such that they can afford basic services such as housing and education for their children,” said Gatete.

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As welcome a move as this is, there is a need for liberalisation of the pension sector to give people saving options.

“If we had private pension schemes, it would encourage people to save more. It’s about the returns you get from the options available to you,” said Eric Rutabana, a business expert.

But the government needs to first fix the pending issues in the existing pension scheme, say players in the industry.

“The law says the pension benefits are supposed to be reviewed every five years, but this hasn’t been done. People continue to suffer with a pension system which doesn’t help them much,” said Dominique Bicamumpaka, the president of advocacy committee for pension and minimum wage at Cotraf, a syndicate of workers trade unions.

He added that many pensioners have been getting meagre benefits for many years, something he blames on the computation system, which bases one’s pension on the nominal rate at the time one joined the scheme.

READ: New higher retirement age will delay pensions, Rwandan workers lament

“They don’t put into account the inflationary rates, or the fact that a lot has changed since you started earning. These are some of the things to look into, but they don’t,” he said.

He added that there are places where pensioners have cards they use to get access to transport, healthcare and other basic services.

Mr Bicamupaka said the reason some of these challenges are not addressed is because there is no adequate representation for the old people especially those in pension.

A 2015 report, the “Melbourne Mercer Global Pension Index,” compiled by Mercer and the Australian Centre for Financial Studies, ranked Denmark as the country with the best pension system in the world, followed by Netherlands, Australia, Sweden, Switzerland and Finland.

Denmark’s pensions system consists of a public basic pension scheme, a means-tested supplementary pension benefit and fully funded, mandatory private schemes, run by large funds rather than individual companies.

Saving remains a challenge across different age and economic segments of the population, with many people, even those who have worked for many years, having none.

“People invest their surplus resources in assets like land instead of saving it with banks, partly because the interest they get with banks is low compared to the returns on these assets,” said Mr Rutabana.

He said many people do not save, not because they don’t want to, but because they have many dependants who they spend the money on.