Retirement Pension

Retirement Pension is the mode by which most of our members earn a benefit from SPF. From the year 2006 until 2016 we have experienced over 5 fold increase in member earning a retirement pension from 877 to 4226 respectively. Click on the link to read more…

Subsection – The monthly retirement Pension

The Reform – The new pension formula/accrual rate

In most countries and the current trend benefits are calculated on the basis of a benefit formula with an accrual rate specified in the pension legislation.

The emphasis of the reform is a clearer benefit formula for the Seychelles Pension Fund to link benefit with contribution.  This provides a more transparent methodology in the calculation of pensions and would institutionalize this methodology. At the same time, this would also make it easier for the Government to make projections on the fiscal outlook of the SPF.

The benefit formula uses pension assessment base –average wage for the past five years x wage growth applicable, accrual rate and years of contribution of the member at the time of retirement to calculate the pension benefit.

Benefit Formula: average wage for the past five years X wage growth applicable (adjustment of past earnings) X accrual rate X years of contribution of the member

 


The accrual rate for the year 2016 is 1.67%.

The above formula is transparent, easy to understand for members and takes into consideration the years of contribution of the members.  It is to encourage members to contribute and work longer to have a better pension. In fact throughout our pension awareness programs at various work places members have expressed the wish that their pension should be linked more to their years of contribution which has been addressed in the new formula

The number of years will gradually increase by one year every year as the SPF gets additional records every year.

So initially wages in last 5 years will be updated by wage growth and then divided by 5 to find the average earnings.

The wage growth data is available from the employment and earning statistics issued by the National Bureau of Statistics .

  1. Accrual Rate
    The accrual rate is the rate at which a member earns a replacement rate per year of contributions. The methodology used to calculate the accrual rates for the SPF is on the basis of members’ records.
  2. Years of Contribution
    Needless to say, different members contribute to the SPF in different period and their length of service is different. Currently, the calculation of the pension benefit at the time of retirement is not strictly linked to the years of contribution the members contribute to the SPF.  The new benefit formula aims to strengthen the link between years of contributions and pensions at retirement.This would improve the fairness of the system as someone who contributed for 30 years and someone who contributed for 20 years would be treated differently with the former receiving a higher benefit in line with longer years of contributions to the SPF.Given that years of service and the accrual rate are important determinants of the pension benefit at the time of retirement and given that the SPF  does not want a significant deviation from the pension levels calculated using the current methodology in the initial years of reform,    the World Bank conducted analytical work to look at the what the accrual rate would be on the basis of (i) the current target replacement rate of 33 % ; (ii) the current average length of service and came up with an accrual rate of  1.75 % per year for 2015.  The future accrual rates were calculated on the assumption that members will contribute for longer periods. This assumption is made on the basis of the analysis of contribution density using SPF records. 

 

Download Normal retirement leaflet to read more about

 

Download application form for normal retirement pension