A member will retire under Section 28 of the LASF Act if the employment is discontinued, through no fault of the member, as a result of a reduction in staff of his employer or reorganisation or abolition of the member’s office in order to facilitate improvements in efficiency or organization. Generally, this kind of retirement is known as retrenchment.

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Qualifying Conditions

Under sub-section 1 of section 28 of the Act, if a member who has had at least ten years of continuous service is retrenched:

a) Such a member shall be granted a retirement benefit; and
b) Two-thirds of the retirement benefit payable to such a member may be commuted, at the date of the termination of the service, for a lump sum at the rate laid down for his age in the First Schedule of the Act.

However, a member is at liberty to elect to be paid under the following three conditions, as opposed to the above:

a) The retirement benefit be payable annually until the date on which the member attains the pension age and shall then cease. The Act provides that in the event of death of such a member prior to the date of attaining the pension age, the widow and children shall be entitled to a benefit calculated in accordance with the provisions that apply to death cases, i.e. Subsection (1) and (2) of section 35 of the Act (see notes under Death Benefits);
b) A lump sum equal to the amount of the member’s contributions plus the contributions of the employer, together with 4% interest thereon, compounded annually; and
C) One-third of the retirement benefit payable be commuted at a rate laid down for his age at the time of retrenchment as contained in the Third schedule of the Act.

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Worked example:
Mr Banda was retrenched on 31 December 2002. His particulars are as follows:

Under subsection 1, the computation will be as follows:
Annuity =   Annual salary x Length of service
660

= 2,833,368.00 x126
660

= 540,915.71
Commutation of 2/3 gross annuity for lump sum
GrossAnnuity =  K540,915.71
Less2/3 Commuted = K360, 610.47
NetAnnuity = K 180, 305.24
Lump sum payable = 2/3 Comm. (K360, 610.47) x Comm. Factor1, 1st schedule (31.82)
=  K11,474,625.16

Under subsection 2, the computation will be as follows:
Annuity =   Annual salary x Length of service
660

= 2,833,368.00 x126
660

= 540,915.71
Commutation of 2/3 gross annuity for lump sum
GrossAnnuity =  K540,915.71
Less2/3 Commuted = K360, 610.47
NetAnnuity = K 180, 305.24
Lump sum payable = 2/3 Comm. (K360, 610.47) x Comm. Factor1, 1st schedule (31.82)
=  K11,474,625.16
Commutation of 2/3 gross annuity for lump sum
GrossAnnuity                                                         =  K540,915.71
Less2/3 Commuted                                                                                                                                                  = K360, 610.47
NetAnnuity                                                             =  K180,305.24
Lumpsum payable  =  2/3 Comm. (K360, 610.47) x Comm. Factor2, 3rd schedule (29.08)
=  K10,484,552.47
In addition, under subsection 2, the member will be entitled to a double refund of his/her contributions with 4°Io compound interest as follows:
Own contributions + employer’s contribution
= K3, 348, 823.70
Add compound interest                                           =  K509.906.52
Sub-Total                                                                = K3, 858, 730.22
Total Benefits payable (under subsection 2)
= K 14, 343, 282.69
Mr Banda will be requested to choose whether to be paid under subsection 1 or subsection 2.

• If he elects to be paid under subsection 1, he would get a lump sum payment of K11, 474, 625.16 first, and start drawing a pension of
  K1 80,305.24 per year until death.
• If he elects to be paid under subsection 2, he would get a total payment of K14, 343, 282.69 first, and start drawing a pension of
  K180,305.24 per year until he attains 55 years. The membership and monthly pension cease when attains the age of 55.
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Required documents

Upon retrenchment, the member will be required to present the following documents to the Fund in order to access the benefits: a) Introductory letter from the employer, signed by either of the signatories registered and recognized by the Fund b) Official retirement letter from the employer c) Certified copy of the member’s NRC d) LASF Forms S/i - Sf5, duly filled in and certified by both the employer and member e) A copy of the Board/Council Resolutions or minutes of the Board/Council meeting at which it was resolved that the member be retired under Section 28 of the Act Important Note: 1. Board resolutions are critical to any claim under section 28 of the LASF Act. The Fund will not process any daim under this section unless it is backed by minutes of the Board at which a decision was made to retrench the affected person. This is particularly so because all benefits paid by LASF under Section 28 of the Act are required to be refunded by the employer and the minutes serve as proof that the employer is fully aware of the financial implications. 2. Commutation Factors are provided for in the Act to determine the benefits due to a member for a particular age.

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