Staff at RSSB want the best possible pension for Rwanda’s workers. (Photo: RSSB Flickr)
The recent decision by the Rwanda Social Security Board (RSSB) to increase worker contributions from 6% to 12% beginning in February 2025 has sparked a wave of debate and concern. While the initial reaction on social media has been largely negative, a closer examination of the issue reveals the necessity of this decision for the long-term financial security of Rwandans.
The Need for Reform
The current 6% contribution rate, which has remained unchanged since 1962, is outdated and inadequate to meet the evolving needs of a growing and aging population. Life expectancy in Rwanda has significantly increased over the past few decades, leading to longer retirement periods. Additionally, the rising cost of living necessitates higher pension benefits to maintain a decent standard of living in retirement.
A Global Perspective
To understand the rationale behind the RSSB’s decision, it’s helpful to compare Rwanda’s contribution rate to other countries. Many developed and developing countries have significantly higher contribution rates:
Singapore’s Central Provident Fund (CPF): This mandatory savings scheme requires contributions of up to 37% of an individual’s salary, split between the employee and employer.
Chile’s Pension System: Workers contribute 10% of their salary, while employers contribute an additional 10%.
South Africa’s Retirement Funds: The minimum contribution rate is 7.5%, with employers contributing an additional 7.5%.
Kenya: The total contribution rate is 12% of monthly salary, split equally between the employee and employer.
Ghana: The total contribution rate is 13.5% of monthly salary, with the employee contributing 7.5% and the employer contributing 6%.
Morocco: The total contribution rate is 23.5% of monthly salary, with the employee contributing 13.5% and the employer contributing 10%.
While these countries have different economic contexts and social security systems, they highlight the trend towards higher contribution rates to ensure adequate retirement savings.
Addressing Social Media Concerns
The social media backlash against the RSSB’s decision is understandable, as any increase in deductions from salaries can be perceived as a burden. However, it’s important to consider the long-term benefits of this reform. By increasing contributions, the RSSB can:
Provide higher pension benefits: A larger contribution pool enables the fund to pay out higher pensions to retirees.
Improve investment opportunities: Increased funds allow the RSSB to invest in a wider range of assets, potentially generating higher returns.
Enhance financial security: A stronger social security system provides a safety net for workers, reducing reliance on family or government support in old age.
The Importance of Investment
The RSSB’s ability to invest the contributions of its members is crucial to the long-term sustainability of the fund. By investing in a diversified portfolio of assets, such as stocks, bonds, and real estate, the RSSB can generate significant returns over time. These returns can be used to pay out benefits, cover administrative costs, and build up reserves to weather economic downturns.
However, it’s important to note that investment decisions must be made prudently, balancing risk and return. The RSSB should prioritize long-term growth and stability over short-term gains. By investing wisely, the fund can ensure that it has the resources to meet its obligations to current and future generations of Rwandans.
In conclusion, the RSSB’s decision to increase contribution rates is a necessary step to strengthen Rwanda’s social security system. While it may impose a short-term burden on workers, the long-term benefits are significant. By increasing contributions and investing wisely, the RSSB can secure a more prosperous future for all Rwandans.
