SPF reveals new retirement pension calculation |12 September 2014

A new formula will be used to calculate the retirement benefits of its clients, Seychelles Pension Fund chief executive Willy Confait has said.

He said this will come into effect as of January 2015.

Mr Confait was speaking to the local media earlier this week at the Seychelles Pension Fund conference room at the Caravelle House.

It was in the presence of the general manager Marie-Ange Waye-Hive, marketing and promotion manager Darrel Bristol, and the marketing and promotion assistant Vanessa Dingwall that Mr Confait announced the upcoming changes in the process of calculating a client’s benefits.

“The World Bank, the Seychelles Pension Fund and the Ministry of Finance, Trade and Investment have for one and half years been holding  discussions on pension reforms with a view to further modernise the Seychelles Pension Fund.  The government sought the help of the World Bank to assess the sustainability of the fund and determine the reforms required to improve equity and fairness in the system, notwithstanding the importance of sustaining the fund in the long term,” Mr Confait said.

“The current benefit system is based on pension as an earning replacement and very much linked to one’s salary which is increased on an annual basis based on the consumer price index/inflation rate. It was designed to apply thus pay pensions immediately on its introduction. The system is well established in Seychelles and was introduced in January 2006 after an extensive period of public consultations over a period of three months,” Mr Confait explained.
The new benefit system will be calculated as the average wage for the past five years, multiply wage of growth applicable (adjustments of past earnings), multiply accrual rate multiply years of contribution of the member.

The number of years will gradually increase by one year every year as the Seychelles Pension Fund gets additional records every year. So initially wages in last five years will be updated by wage growth and then divided by five to find the average earnings.  The wage growth data is available from the employment and earning statistics issued by the National Bureau of Statistics.

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 Seychelles Pension Fund is on the basis of members’ records.  

 “The new formula is transparent, easy to understand for members and takes into consideration the years if the members compare to the current system,” said Mr Confait.

“The new pension formula is applicable to new retirees only.  It does not affect any current pensioners who continue to draw their pension which is increased annually based on the consumer price index average yearly inflation subject to a maximum of 5% in order to protect the Seychelles Pension Fund,” added Mr Confait.

Pension under the new formula will be linked more to contribution and will result in a higher pension to members who have contributed longer and whereas in view of the transition period it has no adverse  impact on retirees who have contributed the minimum qualifying period between 10 to 13 years.