The time period upon which the pension for Class I contributors (employees) was calculated prior to the reforms, was based on the average of the best three consecutive years out of the last ten years; and for Class II contributors (self-employed) on the basis of the average of the last ten years.
The reforms concluded that the existing calculation mechanism gave rise to a number of issues. Among others, these include
(i) discrimination between employed and self-employed persons;
(ii) the criteria best of three consecutive from the last ten years placed pressure on employers to increase staff salary’s in the last years of employment; and
(iii) based on a traditional model of employment where it is presumed that persons progress by seniority and hence they are likely to have a higher income at the end of their career then at any other time during their employment journey.
In reforming, the period to be taken into account when calculating the social security pension was amended, and was changed to a fairer mechanism, taking into account the best 10 years of employment, irrespective of whether these took place in different stages of a person’s employment journey, over their work career lifetime – defined to be 40 years.
Table below illustrates the gist of the 2007 reforms whereby the accumulation period for qualification for the full social security contribution was amended.
Table: 2007 Reforms
|Born on and after 1969||Switchers||Best 10 out of 41 years|
|Born on and after 1962 up to 1968||Switchers||Best 10 out of 40 years|
|Born between 1959 and 1961||Transitional||Yearly average of the basic wage during the best 3 consecutive calendar years within the last 13 consecutive calendar years|
|Born between 1956 and 1958||Transitional||Yearly average of the basic wage during the best 3 consecutive calendar years within the last 12 consecutive calendar years|
|Born between 1952 and 1955||Transitional||Yearly average of the basic wage during the best 3 consecutive calendar years within the last 11 consecutive calendar years|
|Born during and prior 1951||Exempt||Yearly average of the basic wage during the best 3 consecutive calendar years within the last 10 consecutive calendar years|