Monika Queisser
Published: 2016
Total Pages: 36
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The design of new pension systems in African countries requires choices between defined benefit and defined contribution schemes, between funding or pay-as-you-go schemes, and between public and private management. But those choices are less important than the basic challenge of improving macroeconomic stability, regulatory capabilities, and the ability to extend coverage to citizens.All of Zambia's pension schemes are deficient in design, financing, and administration. This report urges that Zambia restructure its social protection system to complement its new economic strategy. That restructuring must address such basic problems as:- The macroeconomic fluctuations and an unstable financial sector that make effective pension fund management impossible.- High inflation rates (which erode the real value of reserves) and politically-motivated low-yield investments and loans.- Income ceilings that are regularly adjusted for inflation.- Overgenerous pension benefits for the public sector, intended to compensate for social hardship resulting from economic adjustment.- Inadequate management of pension fund operations.In the short and medium term, the objectives should be to settle outstanding pension claims, revise early retirement provisions and investment policies, and improve capabilities for administering statutory pension funds.In the long term the objectives should be to convert the Zambia National Provident Fund (ZNPF) into a modest basic pension scheme for private sector employees, and subsequently integrate civil servants and public sector employees into that scheme; establish regulatory provisions to develop and supervise private pension funds; and establish an administrative mechanism to review social protection policy and to supervise and coordinate its application by all agencies.This paper - a product of the Financial Sector Development Department - is part of a larger effort in the department to study pension systems and contractual savings.