Maintaining Adequate Financial Capacity at Retirement

By Titus Tembo

Retirement is an inevitable stage in one’s life where an individual disengages from all mainstream active work after reaching retirement age. In some cases, some members of society are still able to engage themselves in one line of business or the other, while others retire and are completely inactive.

In order for one to maintain the life they lived while in employment, it is cardinal that they plan for their retirement. The fact is that the financial capacity of a retiree is lower than what it was before. Especially in cases were their gratuities and pensions are not paid as at when they fall due.

This week’s article will review the nature and concept of retirement, identify the factors influencing the maintenance of adequate financial capacity at retirement, and examine the measures that could be adopted to maintain adequate financial capacity at retirement.

In Zambia there are three types of retirement namely; Early retirement which occurs when one chooses to retire before their designated time, for instance pension scheme members who were scheme members before 5thJanuary 2016 have the option to retire at age fifty-five (55). Secondly, we have Normal retirement, retirement that takes place when one in employment retires at the specified retirement age – the current retirement age is 60. Late retirement is when one chooses to go beyond their retirement age; ideally, a pension scheme member who has attained retirement has the option to retire at sixty-five (65) if he/she gives his employer a year’s notice as a requirement by law.

The social protection system in Zambia is a 3-tier arrangement, which consists of: Contributory Schemes; National Pension Scheme administered by the National Pensions Scheme Authority (NAPSA), which is mandatory. Contributory Schemes; Private Occupational Pension schemes that were 242 as at 31 December 2019, which are set up by employers. Personal Pension Plan; this is where an individual can make personal investments at an individual level through insurance companies, banks and fund administrators.

Contributory Schemes are financed through payroll contributions and cover employees in the formal sector. Contributory Schemes consist of National Pension Scheme (NPS), Local Authorities Superannuation Fund (LASF), Public Service Pensions Fund (PSPF) and Worker’s Compensation Fund Control Board (WCFB).

In Zambia, we also have Non-Contributory Schemes consisting of tax-financed programmes that are meant to cover the extremely poor, the elderly (60+ years and children under the age of 5). These social assistance schemes include Social Cash Transfer, Child Grant and Social Pensions and Public Welfare and Assistance Scheme (PWAS). These schemes however, have suffered due to the fiscal deficits resulting from tight liquidity conditions in the domestic market together with an unfavorable global environment.

However, in order for a pension to be sustained for a long period of time, it requires the utmost discipline. It requires proper planning to ensure that it serves its purpose. Financial capacity is the ability of an individual to manage his/her own money/financial affairs and make relevant decisions while keeping in mind all possible financial and legal consequences of his/her acts.

Low financial capacity leaves a huge part of the population with limited financial resilience to deal with unexpected life events. Societal influences encourage spending now rather than saving for the future. People tend to spend more than they can afford because they feel under pressure to match the spending behaviors of friends and family.

On the other hand, adequate financial capacity refers to keeping substantial finances to deal with future unexpected life events and obligations. Retirees that are financially capable are able to make informed financial decisions. They can budget and manage money more effectively. They understand how to manage credit and debt, they are able to access needs for insurance and protection and are able assess the different risks and returns involved in different saving and investment options. Moreover, they have an understanding of the wider ethical, social, political and environmental dimensions of finances.

Retirement planning may be associated with a number of socio economic characteristics such as knowledge, skills and attitude. These factors, endorsed by the Financial Services Authority, London, provide basic financial literacy and efficient financial skills.  

Basic knowledge and understanding is required in managing ones financial affairs. Apart from knowledge, specific skills are needed to apply knowledge received in order to manage money and make appropriate financial decisions. Attitude, financial responsibilities and societal factors like family demands or social networks and environmental factors such as access to financial products, financial infrastructure and consumer protection mechanisms are all factors that influence financial capacity at retirement.

Despite the many factors that may contribute influencing ones financial capacity at retirement, there are measures that can be taken to maintain ones financial capacity after retirement.

Committing some resources in assets, especially tangible assets likes real estate, can ensure financial freedom upon retirement. These assets appreciate in value over time and are regarded as good sources of retirement income. A retiree is able to invest in land that can be sold later on after it has gained interest, build property that can provide an income stream from rentals and one is at liberty to invest in bonds and shares all of which would be able to sustain the retiree’s life.

To maintain financial capacity, planning and maintaining a level of savings is very cardinal. One must be able to deal with a large fall in income, cope with large unforeseen expenses and be aware of possible sources of financial help. This will greatly help in managing gratuities and pensions. Developing a saving culture can guarantee a level of financial security upon retirement. One sure way of ensuring a steady flow of income is by becoming an entrepreneur, or in other words meeting the needs of others for a fee.

Regardless of the measures that one may put in place, they may not be as effective if the retiree does not practice effective management of their money. This requires the retiree  to live within their means. Staying within one’s means involves developing strategies to make ends meet and resisting pressures to spend or borrow money (for consumption).

Yearly, the number of retirees increases globally, and many of them are less prepared for the life postemployment. Being accustomed to a steady flow of income, they tend to become confused, depressed and devastated when they no longer receive a monthly income. With the array of options, methods and strategies available, a retiree can live his life optimally, meeting his financial needs even after retirement.

For comments or questions, send us an email at pia@ or follow us on our Facebook page, Pensions and Insurance Authority.

You can call us on 211-251 401/5 0r 0977-335809 or 0965 – 255136.

For complaints, kindly use the following details:

Pensions’ related complaints: Mobile: 0950 – 136663, Email: pensions@

Insurance – related complaints: Mobile: 0950 – 136662, Email: complaints, insurance@

The author is an Inspector – Prudential supervision in the Pensions department at Pensions and Insurance Authority