From October 1, all companies governed by labor law will be required to pay 4% of wages as pension contributions. Two percent is the employer’s obligation, with employees required to pay the remainder.
To get more information ahead of the new system taking effect, The Post sat down for an exclusive interview with Heng Sophannarith, deputy chief executive of the National Social Security Fund (NSSF).
What is a retreat?
Sure, you might not be familiar with the term, but we’ve all heard of retirement benefits. In the past, we talked a lot about the benefits we received when we stopped working. Both are identical. It is an allowance when you are retired.
Which institutions are obliged to contribute to pensions?
The payment of pension contributions is compulsory for all employers and employees. All industries, whether air personnel, seafarers or domestic workers, are required to contribute jointly to the NSSF.
Non-governmental organizations and civil society organizations have the same obligations, provided they have salaried employees. Those who work outside the system will not yet pay contributions to the CNSS. We refer only to those who are covered by labor law.
Are there different types of retreats?
There are three types of pensions.
Old age pension refers to the money people receive when they reach the age of 60. If he contributes until retirement age, when he retires, he will receive monthly payments.
The invalidity pension will be paid in the event of early retirement caused by accident or illness.
The other is the survivor’s pension, which means that the next of kin of a contributor to the pension can collect the benefits due to their deceased family member. A cremation allowance will also be paid.
What are the requirements for receiving an NSSF pension?
Anyone affiliated to the CNSS is entitled to an old-age pension if he meets the conditions of age of at least 60 years and having contributed for at least 12 months.
To benefit from a disability pension, the member must have contributed for at least 60 months before the accident or the diagnoses which prevent him from continuing to work.
For the survivor’s pension, if the insured has contributed less than 60 months before dying, the spouse or dependent child will receive the benefits. Only the spouse can produce a marriage certificate and has no income.
A dependent child must be under 18, unmarried and without income. If the child of a member of a deceased NSSF member suffers from a chronic illness or disability, they will receive the pension for life.
How do I apply for a disability pension?
This invalidity pension is paid after a member has fallen ill or had an accident which means that he will not be able to return to work. They must complete an application form and apply. We will assess each application on a case-by-case basis.
How much should a member pay?
Under the new law, the mandatory minimum wage is set at 400,000 riels and the highest mandatory wage is 1.2 million riels. The pension contribution is set at 4% for the first five years, with the employer paying 2% and the employee paying the balance. This contribution will increase to 8% over the next 5 years.
Do private sector individuals have to pay more than the legal minimum?
A member of the private sector can ask to pay more than the minimum. The member must apply directly to the NSSF to select their dues and understand the benefits to which they will be entitled.
How does the CNSS calculate the deductions and the amount of the pension paid?
If a member’s salary is low, their pension payments will be lower than those of those who have contributed more. Another factor of course is the number of contributions a member has made. If an employee makes regular contributions from age 20 until retirement age, he will receive more than someone who has just started making contributions.
I want to point out that of the four percent, the employee pays only two, so the employer subsidizes the pension. When a member retires, they get the full four percent, and the employer gets nothing.
A simple example that I can give you is that of an employee who earns a salary of 1.2 million riels and who saves 4% in the bank every month from the age of 20. At current interest rates, he will receive $60 to $70 a month in payments when he retires.
However, if he contributes to the NSSF, the amount could reach $172. It’s a big difference.
What should institutions responsible for payment do?
They don’t have to worry. Before October 1, we will send new forms to all companies to make it easier for them to implement. Companies that have not yet registered with the CNSS are required to register no later than 30 days after the announcement of the entry into force of the law. Companies already registered with the CNSS for health care and occupational risks are automatically included in the system.
If a member of the CNSS pays this contribution for a certain time and then resigns, is the pension still valid?
If an NSSF member resigns, we assess whether they have started working at another company. If they have, their new employer will continue to contribute for them.
If he quits his job and no longer works in the private sector, he can then apply to the NSSF for what we call old age benefits. It is a one-time contribution payment that is paid to those who do not qualify for the old-age pension.
What will the government do with company contributions in the period before an employee begins to receive a pension?
By law, contributions received are fully earmarked for return to NSSF members, although each chapter has operating expenses.
In NSSF, all financial activities are carried out through banks. There will be no cash held by the NSSF. The money will be kept in various banks to ensure that it earns interest.
In the future, we will establish an investment commission, which will discuss ways to invest the money and get a higher return than the banks can offer.