A friend encouraged me to write about how persons can use voluntary contributions to top up their Social Security pensions. Another friend who is nearing pension age is enquiring about using the facility to qualify for a pension instead of a grant. He is convinced, and rightly so, that it is better for him to get a monthly payment rather than a one-time grant. This information is presented, therefore, in response to both of them and to inform all of us about a facility that exists at Social Security.
Regulations contained in SR&O No. 17 of 1978 allow persons to enhance their pension rights by making voluntary contributions under certain circumstances. As the term implies, these are payments that persons are not obligated to make to the Social Security Fund if they are neither employed nor self-employed.
One circumstance that lends itself to the payment of voluntary contribution occurs if you work for an establishment that is fully based in the Federation, and that institution sends you abroad to work. That employer is obliged to pay your full contributions at home for 12 months.
If the company needs you to remain for longer than 12 months, then the obligation to pay contributions into the St Kitts-Nevis Social Security ceases, but you can protect and enhance your accumulated pension credits in Social Security and add to them by electing to pay voluntary contributions on your own behalf. The effect of this is to help you to qualify for, or to enhance your long-term benefits of Age and Survivors Pension.
Other circumstances under which voluntary contributions can be made include periods of overseas study – students can continue to pay while studying; those people who have the good fortune of retirement before age 62 – like civil servants – and remain away from work can pay voluntarily; and during those periods of temporary unemployment for those persons who are in seasonal employment (both employed persons and self-employed persons). It seems as though, instead of filing a NIL report, one can apply to pay voluntary contributions.
Members of Social Security should bear in mind that after 500 contributions you have qualified for an Age Pension but at the minimum rate of thirty percent of the appropriate wages, and that further credit is gained by additional contributions in multiples of 50 contributions, up to a maximum of sixty percent.
That is to say, for every full year worked after having worked 10 years, at least an additional percentage point can be gained towards age pension, while at the same time protecting rights to short term benefits.
During periods of ‘inactivity’ – of temporary migration, of overseas assignments, a facility has been provided that allows the insured person to continue to accrue credits, even though the rights to short term benefits (such as such as sickness, maternity and employment injury benefits) have lapsed. Members should also bear in mind that pension payments are exempt from Social Security deductions.
A voluntarily insured person does not have to pay the same full rate of contribution that is payable on behalf of someone who is working. While the full contribution for a regular working person is at the rate of 11 percent, the voluntary contributions payable is at the rate of 5 percent only.
Remember, the regular working person’s contribution is made up of 5 percent from the employee and 6 percent from his or her employer. In other words, as a voluntary contributor you would only be paying the employee portion of a full contribution. Notwithstanding this, full pension credits will apply. To some extent, it is this ‘half’ payment that excludes the voluntary contributor from access to short term benefits.
Persons desirous of paying voluntary contributions must apply to the director of Social Security for permission to do so. You will need to apply for the certificate within thirteen weeks after your last normal contribution. This is a specification of the law. When you apply for and obtain a Certificate of Voluntary Insurance, Social Security will calculate the specific amount to be paid by you. This would be based on certain factors.
In order for you to be eligible to pay voluntary contributions, you must have at least 104 contribution weeks (2 years) on your record. At the point where you apply for a Certificate of Voluntary Insurance Social Security will trace back the period of two years or 104 weeks immediately before the time you stopped working, or the time when you ceased to be eligible to pay regular contributions. Your total wages earned during that period will be added and then divided by two (the number of years) to provide what is called the average annual wages.
It is important to be on time with payments of voluntary contribution payments. Your entitlement to pay voluntary contributions will automatically lapse if you fail to pay a contribution on time. And there is no refund.
To make things easier for the voluntary contributor, Social Security will allow payments in advance. In this way a contributor will not be under stress to remember to pay every month.
There is one thing that persons must bear in mind. Voluntary contributions cannot buy time. That is, if you only have one year before your 62nd birthday and you need 75 credits towards the monthly pension, then you cannot buy more than the 52 contributions. That is why it is so important to keep abreast of your contribution records.
To date, several persons have used, and are using this facility to their advantage. Some non-nationals, having experienced our system, enquired whether they could become voluntary contributors even as they kept their options provided by the Reciprocal Agreements.
In his song “you’re my angel”, Shaggy notes that life is one big party when you’re young and asks who will have your back when it’s all done? Social Security will. We believe in second chances. This is your second chance.
For more detailed information on this area of Social Security coverage, you may contact your Social Security Office on the Bay Road in Basseterre, St. Kitts or on Chapel Street in Charlestown, Nevis. Or come in and talk with us.