Pensioners
Pensioners
Old-Age Contributory Benefits
Old-Age Contributory Benefit may either be a grant or pension. If a person qualifies for an Old-Age Contributory Pension, an Old-Age Contributory Grant is not payable.
As a result of Pension Reform and the introduction of flexible NIS retirement / pensionable ages, persons may retire on a NIS pension at any age from 60 to 70. To ensure that there is no financial advantage as a result of choice of retirement age; persons opting for early retirement will receive a reduced pension. Late retirement up to a limit of age 70 would result in increases in pension at a percentage equal to the rate for decrease for persons opting for early retirement. The adjustment rate has been set at 0.5% for each month earlier or later than the NIS pensionable age.
A person’s pension at pensionable age is not tied to retirement. Pensionable age is currently 67 years, effective from the 1st January 2018.
NIS Pensionable Ages
Date | Age |
---|---|
Prior to 1 January, 2006 | 65 years |
1 January, 2006 to 31 December, 2009 | 65 ½ years |
1 January, 2010 to 31 December, 2013 | 66 years |
1 January, 2014 to 31 December, 2017 | 66 ½ years |
1 January, 2018 and after | 67 years |
Old-Age Contributory Grant
To qualify for an Old-Age Contributory Grant, one must:
- have attained pensionable age;
- have at least 50 contributions paid or credited to one’s account.
How is an Old-Age Contributory Grant Computed?
The amount of an old-age contributory grant is a lump sum equal to 6 weeks average insurable weekly earnings for each 50 contributions actually paid or credited to the insured person’s account.
Average insurable weekly earnings for the purpose of Old-Age Contributory Grant is the sum of the insurable earnings on which contributions were based, divided by the number of weeks of contributions.
Old-Age Contributory Pension
The Old-Age Contributory Pension is now available at ages ranging from:
- The NIS pensionable age – currently 67 years;
- Voluntary pensionable age – any age below the pensionable age as low as age 60.
- Late retirement age – any age after the NIS pensionable age but up to 70 years.
In addition, to qualify for NIS pension, one must:
- have at least 150 contributions actually paid to one’s account;
- have at least a total of 500 contributions paid or credited to one’s account.
How is Old-Age Contributory Pension Computed?
There are currently three (3) bases for calculating NIS Pension. The calculations are based on the age of the person applying for pension at 31st December 2002.
- For persons aged 56 or over – on 31st December 2002, their pension would be calculated using the old basis.
- For persons aged 47 and over but less than 56 years on 31st December 2002, their pension would be calculated using 50% new and 50% of the old basis.
- For persons under 47 years – at 31st December 2002, their pension would be calculated using the new basis.
All other pensions would be calculated using 50% new and 50% of the old basis. Persons born on or before 31st December 1946 will stay on the old basis. Those born on 1st January 1956 or later go to the new basis. All those in between go on the 50/50 basis.
Old Basis
The annual rate of pension is 40% of the average annual insurable earnings of the insured person, supplemented by 1% of the total insurable earnings on which contributions were based subsequent to the first 500 contributions paid or credited, but subjected to a maximum of 60% of average annual insurable earnings (at pensionable age), and a minimum pension of currently $243.00 per week.
Average annual insurable earnings for the purpose of an old-age contributory pension is the sum of the insurable earnings on which contributions were based during the best five contribution years of the insured person’s contribution life, divided by 5. Where the contribution years are less than fifteen, the total number of contribution years will be used.
Supplemental Pension
The supplemental pension is computed by totaling the weekly insurable earnings represented by the contributions in excess of the first 500 and finding 1% of the amount.
Maximum Pension
The maximum pension at pensionable age i.e. the basic pension plus supplemental pension, shall not exceed 60% of the average annual insurable earnings.
New Basis
Using the new basis, the pension is calculated based on the number of years of contributions and the annual average insurable earnings over the best five years. The pension is computed by finding 2% of the average annual earnings for the first 1000 contributions and then finding 1 ¼% of the remaining years. This pension is also capped at 60% of the average annual insurable earnings.
The Old-Basis computation is as follows:
Example – Part 1
Contribution Weeks 1,100 weeks (22 years)
(For NIS purposes, 50 weeks is
equivalent to 1 contribution year)
Annual Average (of the best 5 years) $35,500
Aggregate Earnings (after first 500 contributory weeks) $426,000
Calculations:
Basic annual pension = $35,500 x 40% = $14,200
Supplementary pension= $426,000 x 1% = $4,260
Total Annual Pension= $14,200+ $4,260 = $18,460.
Weekly Pension = $355
The New Basis computation is as follows:
Contribution Weeks 1,100 weeks (22 years)
(For NIS purposes, 50 weeks is equivalent to 1 contribution year)
Annual Average (of the best 5 years) $35,500 Calculations: 2% for each year for the first 20 years and 1 ¼% for all subsequent years
(For this example, the subsequent years will be 22 years – 20 years =2 years)
Calculations:
Basic annual pension = 20 x 2% x $35,500 = $14,200
Supplementary pension= 2 x 1 ¼% x $35,500 = $887.50
Total Annual Pension= $14,200.00 + $887.50 = $15,087.50
Weekly Pension = $290.14
The 50/50 Basis computation is as follows:
Weekly Pension calculated using Old-Basis (from Part 1 above) = $355.00
Weekly Pension calculated using New-Basis (from Part 2 above) = $290.14
Calculations: ½% of the “Old-Basis” total + ½% of the “New-Basis” total = ½ of $355.00 + ½ of $290.14 = $177.50 + $145.07
Weekly Pension = $322.57
OR
Alternate Calculations:
½% of (the “Old-Basis” total + the “New-Basis” total) = ½ x ($355.00 + $290.14)= ½ x ($645.14)
Weekly Pension = $322.57
Early & Late Pension
The examples shown above are the calculations for a person who would receive his/her pension at the current pensionable age of 66½. The two examples below would show the computations, if this same person took either early or late pension. Please note that an adjustment rate of 0.5% has been set, to create a multiplicative factor, for each month above or below the current NIS pensionable age.
I. Adjustment for Early Retirement Pension:
In order to qualify for an early pension one must have actually retired from employment. It should also be noted that a person qualifying for the minimum pension would not be allowed to claim an early retirement pension, as that would reduce the payment below the minimum standard.
In the first example above, the resulting pension payable at pensionable age (using the “Old-Basis” method) was $355 per week. If a pensioner opted for early retirement pension at age 65 years 9 months, the following would apply:
Pensionable Age = 67 years
Age at effective claiming date = 65 years 9 months
No. of months early = 15 months
Reduction factor = 15 months x 0.5% per month = 7.5%
Pension deduction = $355 x 7.5% = $26.63
Reduced Net Weekly Pension = $355.00 – $26.63 = $328.37
This reduced pension is payable for life unless the pensioner is re-employed.
II. Adjustment for Late Retirement Pension:
If the pensioner had deferred receipt of the pension to age 68 years 2 months, the following (using the “Old-Basis” weekly pension calculation of $355 per week) apply:
Pensionable Age = 67 years
Age at effective claiming date = 68 years 2 months
No. of months early = 14 months
Reduction factor = 14 months x 0.5% per month = 7%
Pension deduction = $355 x 7% = $24.85
Reduced Net Weekly Pension = $355.00 + $24.85 = $379.85