- 5 Marks
Question
Explain the basis for calculating pension benefits under the National Pensions Act, 2008 (Act 766). (5 marks)
Answer
The basis for calculating pension benefits under the National Pensions Act, 2008 (Act 766) includes the following key parameters:
- Age at Retirement:
- The retirement age can be full retirement (60 years or more) or reduced pension (between 55 and 60 years).
- Number of Months Contributed:
- The number of months of contributions to the scheme prior to retirement, with a minimum of 180 months of contributions required.
- Earnings or Salaries:
- Pension benefits are calculated based on the best three years or 36 months of basic salaries on which contributions were paid.
- Pension Right:
- The pension right starts at 37.5% for 180 months of contributions and increases by 0.09375% for every additional month of contributions beyond 180 months, up to a maximum of 60%.
- Early Retirement Reduction Factor:
- For reduced pensions (before age 60), a reduction factor is applied to ensure that early retirement benefits are actuarially equal to full retirement benefits.
- Topic: Income Tax Liabilities
- Series: JULY 2023
- Uploader: Joseph