On the 17th of April 2023, President Hichilema signed into law the National Pension Scheme Authority (Amendment) Bill of 2023, which allows for the partial withdrawal of pensions. This legislation marks a significant milestone in Zambia’s social security system, as it provides more flexibility for contributors to access their pension savings. This article highlights the implications of the amendment on partial withdrawal and its potential impact on the pension scheme and the Zambian economy.
The law now facilitates the withdrawal of a portion of a contributor’s pension savings before reaching the retirement age of 55 years. The new legislation permits partial withdrawal for contributors who have contributed to the scheme for at least five years (at least sixty contributions). The amount that can be withdrawn is limited to a maximum of 20% of the total balance, and the contributor can only make one partial withdrawal. This is a significant point to note – the one-off nature of the withdrawal places a responsibility on the contributor to ensure that use of the sum withdrawn is for their maximum benefit.
This legislative reform is a significant development in the social security system as it provides contributors with more flexibility and control over their pension savings early in their work life. The ability to access a portion of their savings before reaching retirement age can be beneficial to contributors – use can be applied to financial needs, such as medical emergencies, education expenses, or housing needs. Further, partial pension withdrawal can serve as a source of capital for individuals who wish to start or expand their businesses. This will invigorate and promote entrepreneurship and business development, leading to the creation of new jobs and ultimately economic growth. Small and Medium-sized Enterprises (SMEs) are often considered the engines of economic growth, and access to pension funds can provide a valuable source of income for such enterprises.
The NAPSA (Amendment) Act of 2023 on partial withdrawal has potential implications for the pension scheme and the economy of Zambia. On the one hand, partial withdrawal may lead to a reduction in the total amount of savings that contributors accumulate over time, which could impact the sustainability of the pension scheme. However this is subject to further analysis over time. On the other hand, partial withdrawal may encourage greater compliance to the scheme, as it provides citizens’ with more flexibility and control over their savings. This, in turn, could increase the pool of pension savings and potentially stimulate the economy by providing more long-term funding for sustainable investments.
Furthermore, the NAPSA (Amendment) Act on partial withdrawal is consistent with global trends in social security systems, where there is a move towards greater flexibility and customization for contributors. Countries like South Africa have already introduced partial withdrawal options in their pension schemes, and Zambia’s move in this direction is a step towards aligning with global best practices. The introduction of partial withdrawal may also improve the overall perception of the pension scheme among the public, as it demonstrates a willingness to respond to the needs of contributors.
In conclusion, Government’s signing into law of the NAPSA Bill on partial withdrawal is a significant development in the social security system of Zambia. The legislation provides contributors with more flexibility and control over their pension savings, while also potentially stimulating the economy by increasing the pool of pension savings as well as individual citizen’s investment into various economic ventures that could spur job creation and improve household incomes. The introduction of partial withdrawal is consistent with global trends in social security systems and demonstrates a commitment to improving the overall perception of the pension scheme among the public. However, careful monitoring of the impact of partial withdrawal on the sustainability of the pension scheme is necessary to ensure its long-term viability.