Rwanda: Proposed Pension Reforms Effective January 2025

Rwanda: Proposed Pension Reforms Effective January 2025

On November 28, 2024, the Rwanda Social Security Board (RSSB) engaged with the private sector to discuss upcoming pension reforms and their benefits for businesses and individuals. The RSSB has also published a detailed FAQ on its website, addressing the rationale behind these reforms, their economic impact, and their role in strengthening Rwanda’s social security system.

Key Changes in the Pension Reforms:
  1. Increased Contribution Rate: The total pension contribution rate will rise from 6% to 12%, increasing contributions to employees' pension funds starting January 2025.
  2. Expanded Pension Contribution Base: Contributions will now be calculated on the total gross salary, which includes the basic salary, housing allowance, and transport allowances, aligning with the Rwanda Revenue Authority's (RRA) taxable base. This change simplifies administrative processes and ensures contributions are based on comprehensive earnings.
  3. Improved Pension Benefits: Existing pension recipients, particularly those in the lowest earning brackets, will see increased benefits, addressing concerns over pension adequacy.
  4. Gradual Contribution Increase: An additional 2% increase will be applied annually over four years starting in January 2027, bringing the total contribution rate to 20% by 2030. While this may pose short-term challenges, it significantly enhances long-term retirement savings and financial security.
Contributions Split:
Under Rwanda’s mandatory pension scheme, employers and employees currently share the contribution equally, at 3% each, making up the total 6%. Starting January 2025, contributions will increase to 12%, equally split at 6% each. Employers may choose to support employees by covering the additional employee contribution, but where this is not feasible, employees will assume the adjustment.
These reforms aim to create a more sustainable and secure pension system, fostering economic growth and enhancing financial security for Rwanda’s workforce.

Kindly note:

The new pension reforms were approved by presidential order on 9 November 2024, but they still need to be gazetted.

We are in communication with the RSSB to determine whether the new pension reforms will be applied even if the law is not yet gazetted. We will inform you when we have further updates.

View the attachment for more information.

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