SCP Ensures All Retirees A Minimum Of $400 A Month(Brudirect: 18 July 2009 06:18 Written by The Brunei Times)
Employees will be required to chip in a monthly minimum of 3.5 per cent of their earnings for the Supplemental Contributory Pension (SCP) scheme when it is implemented next year, according to a circular letter released by the Ministry of Finance on its official website yesterday.
Employers will contribute the equivalent amount. Self-employed citizens or permanent residents will contribute the same amount but the remainder will be shouldered by the government.
Out of the total seven per cent, six per cent will be placed in the employee's SCP while the remainder goes into a "survivorship protection" account, which essentially guarantees the beneficiary in the event of death before the mandatory retirement age.
His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam on Wednesday announced the new mandatory retirement age of 60 that will come into force on January 1. The current mandatory retirement age is 55.
The SCP is a defined contribution scheme that requires participants and employers to contribute by law every month. As with the existing Employees' Trust Fund (TAP), all citizens and permanent residents working in the public, private and informal sectors are required to join the SCP.
The main objective of the SCP is to ensure everyone will be able to retire at the compulsory age of 60 with a minimum pension of $150 a month. Added with the existing $250 "Old Age" pension, participants will have at least $400 a month to live on for the rest for their lives when they retire.
However there will be a contribution cap for businesses, where employers will only contribute up to a salary of $2,800 salary even if the employee earns more than that. However, the employee can opt to contribute more so as to receive a higher monthly annuity on retirement.
The minimum contribution is $17.50 a month based on a $500 salary. If an employee earns less than $500 a month, the government will top up the contribution to bring it up to $17.50.
The SCP scheme requires a participant to contribute for at least 35 years, beginning from the day he or she starts work. If an employee's seven per cent monthly contribution is still insufficient to enjoy a $150 annuity after he or she retires, the government will help him or her to "catch up" with a maximum contribution of $30 a month.
However, an employee who has joined TAP before the age of 25 will only receive the "catch up" contributions when he or she reaches that age.
Under the survivorship rules, if an employee dies before retirement, the spouse and/or children will receive at least the minimum $900 a month for 15 years. However, if the wife remarries, the payment will be made to the children only.
The SCP is mandatory for participants of the TAP scheme in the private, public as well as the informal sector.
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