Planning for Retirement through a Pension Plan

By Doreen Kambanganji-Silungwe

Old age is recognised as a risk to ones’ ability to generate income. This poses a threat to the ability to sustain a livelihood and this is where planning for retirement through a pension comes in. This week, we will therefore, focus on pensions including its benefits.

By simple definition, a pension is an arrangement under which persons are entitled to benefits upon retirement or termination of employment or upon the occurrence of an event as specified in the law or the document establishing a pension scheme. Children, widows and widowers may also receive a deceased’s pension.

A pension scheme has two stages, namely accumulation and de-accumulation stage. During the accumulation stage, contributions from members are paid into the scheme and the funds are invested. During the de-accumulation stage, the individual starts receiving a pension and the fund value begins to decline.

When it comes to assessing how much savings one will need for retirement, there are several key questions and considerations that you need to take into account such as the lifestyle you envision in your retirement: does the lifestyle look a lot like the one you have now or would you hope to step up a notch in retirement?

In addressing these questions, it is first important to understand the pension system in Zambia. Pension systems consist of pillars which are defined according to the level of benefit that can be derived from them in relation to your current income. This is also known as the income replacement ratio.


The Zambian pension system is organised in three pillars, the first pillar is the national pension scheme, which is administered by the National Pension Scheme Authority (NAPSA). National pension schemes are established with an objective to provide basic social security cover, which helps members to meet basic needs. It is global practice that contribution to such schemes is mandatory for all employed citizens though a country can decide to exempt some sectors.

The second pillar, commonly referred to as occupational pension schemes are employment based and are regulated by the Pensions and Insurance Authority (PIA).  Occupational pension schemes are not mandatory and are set up by employers for the benefit of employees. As these schemes are not mandatory, the opportunity to save under this pillar is dependent on conditions of service. The contribution amount (for both employee and employer) is predefined in the scheme rules and applies to all members of the scheme.


The third pillar consists of personal pension plans, which are offered by pension fund administrators and insurance companies. Under this pension arrangement, an individual is entitled to set contribution rates in line with their retirement vision.

The three pillars exist as building blocks, which, when put together, are meant to improve the income replacement ratio.

In terms of pension design, a pension scheme can be designed as a Defined Benefit (DB) or Defined Contribution (DC) or a hybrid. A Defined Benefit scheme is a pension scheme where the retirement benefit payable is based on a pre-determined formula. On the other hand, a Defined Contribution scheme is a pension scheme where contributions into the scheme are pre-determined implying that the benefit is uncertain as it will depend on accumulated contributions and investment earnings. The last one is a hybrid, which has features of a DB and DC.

Finally, the main reason for a pension scheme is to save for retirement. Viewing one’s life from a life perspective, saving opportunities are at peak when in employment. Therefore, this is the time that part of the income can be deferred or postponed to retirement through a pension scheme.

A pension is also a social protection instrument as it can provide benefits when one loses employment as a result of ill health, death, redundancy or just wishes to take up another job or other activities.

Pensionable employment also provides job security as it gives you considerable certainty that you have a job over a long period usually in excess of 30 years.

For comments, questions or clarifications, send us an email at pia@102.23.123.62 or follow us on our facebook page, Pensions and Insurance Authority. You can also call us on 211 251 401/5 or 0977 335809 or 0965 255136.

For Complaints, kindly use the following details:

Pensions related complaints:

 Mobile: 0950 136662, Email: pensions@102.23.123.62

Insurance related complaints:

Mobile: 0950 136663, Email: insurance@102.23.123.62

The Author is the Communications Manager at the Pensions and Insurance Authority.