The current economic challenges and global uncertainties, including the impact of climate change, the Russia-Ukraine conflict, and the high cost of commodities in Zambia have had long-term consequences on the livelihoods of many Zambians. Recognising the urgent need for accessible cash to cope with the high cost of living, President Hakainde Hichilema recently enacted the National Pension Scheme Amendment Bill 2023. This amendment allows NAPSA members who have contributed to the scheme for at least five years or made 60 contributions to withdraw 20 per cent of their pre-retirement pension benefits.
President Hichilema emphasised the significance of this amendment, stating, “We have signed into law the National Pension Scheme Amendment Bill 2023, which aligns with our commitment to the Zambian people. This new law empowers citizens to reinvest their funds into various ventures and assets of their choice.”
Notably, this development has prompted many workers to queue at various offices across the country, while others are utilising online channels to verify their details and check their accumulated savings. Many contributors have expressed their intentions to invest in small-scale businesses or complete their building projects, among other plans.
With withdrawal amounts ranging from a minimum of K5,000 to a maximum of K160,000 per contributor, Lawson Chama, a civil servant, enthusiastically described the partial withdrawal as a game-changer that revived his real estate business. Chama shared his experience, stating, “After receiving my partial withdrawal, I invested the funds in constructing a boarding house due to the high demand for student accommodation. I anticipate a threefold return on my initial investment of K100,000. I plan to reinvest my earnings into building a block of flats.”
Nelia Banda, an employee at a Chinese clinic in Lusaka since 2002, expressed optimism about the 20 per cent withdrawal threshold, believing it will lead to significant socioeconomic transformation among the working class. Banda shared her aspirations: “I have always wanted to start a poultry business. Once I withdraw my 20 per cent pre-retirement funds from NAPSA, I plan to build a poultry house, purchase day-old chicks, and buy feed to kick-start poultry production. The 20 per cent partial withdrawal is an excellent opportunity for many to venture into entrepreneurship and contribute to the economy’s growth.”
This marks the first time in Zambia’s pension industry history that employees have been granted access to a portion of their retirement benefits before retirement age.
Economic analysts anticipate that this measure will stimulate economic development, reduce poverty, and boost trade and commerce. The increased spending resulting from the higher disposable income of recipients will benefit both the private sector and the national economy. The Pensions and Insurance Authority (PIA) has advised employees to invest their partial withdrawal in ventures that offer a return, emphasizing the importance of avoiding excessive consumption.
Considering the long-term outcomes of this legislation, Zambian employees should refocus their efforts and plan for a better future through strategic savings that tap into the underutilised potential of the informal sector.
Kelvin Chisanga, a financial analyst based in Lusaka, believes that as contributors access their partial benefits, the country will witness increased trade and commerce, leading to higher government revenue. This revenue can be utilised for service delivery and the development of other sectors. Chisanga remarked, “The K11 billion injected into the economy by NAPSA will create aggregate demand, particularly by augmenting liquidity challenges that the economy has been facing. For those with a business mindset, this money serves as a seed to recapitalise their operations.
Given the socioeconomic impact of the Covid-19 pandemic, which resulted in job losses, the timely availability of NAPSA’s pre-retirement package is expected to revive individuals’ economic prospects.
ActionAid Zambia also supports the belief that the 20 per cent partial withdrawal of pension benefits will increase liquidity in the economy, benefiting small-scale entrepreneurs and improving the well-being of senior citizens. This increased liquidity will also enhance access to public services, such as healthcare, improving retirees’ quality of life.
However, considering the challenges associated with accessing funds before reaching retirement age and the potential negative effects of this policy shift, stakeholders have urged the government to engage various parties and implement comprehensive financial literacy capacity-building initiatives. These initiatives will enable NAPSA beneficiaries to benefit from their funds by engaging in productive investment opportunities.
While the lack of a robust social security system remains a concern for Zambians, the most pressing issue is the daily struggle for shelter, food, and hope. While some NAPSA beneficiaries leverage their 20 per cent partial withdrawal to establish thriving businesses and grow their investment portfolios, others opt to invest in low-risk instruments such as government bonds or treasury bills. These investments contribute to individual wealth accumulation and national development.
Amos Kunda, a mine worker from the North-Western province, shared his decision, stating, “I chose to invest my 20 per cent in government bonds. Once they mature, I will use the interest to support my children’s education and reinvest in my agribusiness.”
The National Pension Scheme Amendment Bill 2023 has introduced a significant change in the pension landscape of Zambia. By enabling partial withdrawals, it allows individuals to invest in various ventures, thereby promoting socioeconomic development, reducing poverty, and stimulating economic growth. The government, financial experts, and stakeholders emphasise the importance of strategic investments to maximise the long-term benefits of these partial withdrawals and encourage the beneficiaries to contribute positively to the nation’s progress.